Your Profit Prospects in a Distressed Market
Opportunity abounds for brokers willing to build expertise and find investor clients
By Tom Duncan, CEO, D&P Investment Group Inc.
Today’s real estate market presents many opportunities to make large profits. Mortgage
brokers can take advantage by gaining
expertise and marketing themselves as a
specialist in a particular area.
One of the most-advertised and well-known ways to capitalize on today’s market is by working with real estate owned
(REO) properties. These properties are
bank-owned and most often result from
foreclosure.
These properties, which often can be
bought at a discount, represent a great
Tom Duncan is CEO of
D&P Investment Group
Inc. in Las Vegas and also
has an office in Missouri.
He is a member of the
National Association of
Realtors and belongs to
several investment asso-
ciations. Duncan started investing in raw-land
development 20 years ago. For the past five
years, he has been investing in the foreclosure,
tax-lien and tax-deed market. Contact him at
(636) 232-9500, tlduncan4@yahoo.com,
www.absoluteforeclosurehelp.com or www.
fastforeclosurefi ghter.com.
A Legal Advocacy Group
way for new investors to enter the real estate market. Brokers who learn about and
understand the ins and outs of REO deals
can help fund purchases of individual REO
properties or groups of these properties.
Tax-lien and tax-deed properties also
present opportunities for large profits. Local governments typically place a tax lien
on a property after homeowners go three
years without paying property taxes. A
lien is levied against the home and sold
on the open market, often for the amount
of taxes owed.
When investors purchase these liens,
which are government-backed and -guar-anteed, homeowners receive notice that
their home has been sold for back taxes.
At that point, homeowners must either
pay off their back taxes or give up their
home. If they pay their back taxes, they
also usually must pay a 10-percent to
25-percent penalty, which tax-lien investors collect as profit. If the homeowners
decide to give up their house, the investors typically receive the deed to the property free and clear of all liens, mortgages
and encumbrances.
Tax-deed properties also stem from unpaid taxes and offer the chance at larger
TM
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26 Scotsman Guide | Residential |
scotsmanguide.com | August 2009
payoffs. This market, however, is more
expensive to enter. Investors in tax-deed
properties buy the actual property deeds
at auction, at which time any mortgages
or liens typically are wiped out. Deeds to
homes valued from $85,000 to $400,000
often can be purchased for $15,000 to
$85,000. If the defaulting homeowner
doesn’t pay back the investor, with a penalty typically added, then the deed becomes absolute — meaning the investor
takes ownership of the property for the
amount paid for the tax deed.
The difference between tax-lien and
tax-deed properties is ownership. Whoever has the deed is the owner. Each state
is empowered to decide if it wants to sell
tax liens, tax deeds or both. Tax deeds become absolute when homeowners don’t
settle within a specified timeframe after
the investors’ purchase. Investors don’t
have to take further action to claim the
property, as is the case when assuming full
property-ownership when tax-lien deeds
go unsettled.
The loss-mitigation market is another
area in which brokers can turn expertise into profit. When working in this
niche, brokers earn income by helping
homeowners keep their homes. This is
done by negotiating loan modifications or
repayment plans for homeowners in peril.
Fees can vary, and some brokers charge an
amount equal to one month’s mortgage
payment. Entering this market can be as
easy as contacting defaulting homeowners
and explaining their options.
Brokers also can work with investors
who seek to buy out homeowners in peril.
Brokers who intend to work in the loss-mitigation arena should understand how
to help investors fund these deals, which
often come about because a troubled
homeowner wants out of the property but
doesn’t want to deal with a short sale or
go through foreclosure. Buyout deals often
require the current owner to sign over the
home via a quit-claim deed. Brokers should
know how to help clients through the process, including which contracts must be
signed and where to find funding.
The aforementioned opportunities represent only some of the ways that brokers
can position themselves in today’s market. Whatever you choose to do, make
sure to research the overall process and
the specific prospects in your local area
thoroughly.
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