| When
most people hear the word “bankruptcy,”
the first reactions are intimidation and
avoidance. The fact that it’s a legal
process involving the Federal government
pretty much explains both reactions.
From our informal surveys
of many investor groups across the country,
most real estate investors react precisely
the same way … largely due to a lack
of education and experience. However, there
are so many opportunities for real estate
investors in the bankruptcy niche, that
my partner, Mark Klee, and I have made it
our personal specialty to remove the
fear commonly associated with bankruptcies.
Let’s address the
most common myths and misconceptions:
Myth #1: Bankruptcies are too legally
complicated for the average real estate
investor.
Truth: That’s ridiculous.
Do you need to be familiar with bankruptcy
terminology and the general process of how
a bankruptcy proceeds? Yes. Do you need
to understand the differences between a
Chapter 7 and a Chapter 13? Of course. Do
you need to know the responsibilities and
perspective of the Trustee? You bet. But
you can easily learn all of these details
and more by simply finding the right materials/seminar
and being open to grasping a new pool of
information.
Myth #2: You can’t buy a house
in a bankruptcy.
Truth: Hogwash! Sure
you can. It requires a few more steps than
buying a house that’s not in a bankruptcy,
but it’s more than worth your effort.
Indeed, it’s really a pretty simple
process to get educated enough about the
bankruptcy process and terminology so that
you can speak intelligently with sellers
and Trustees. And the paperwork required
to purchase a home in a Chapter 7 or a Chapter
13 is also very basic. The magic piece of
paper you need from the Trustee assigned
to a Chapter 7 case is called a “Notice
of Abandonment.” If it’s a Chapter
13 case, you need to file a “Motion
for the Sale of Real Estate.”
Myth #3: Only attorneys can deal
with the Bankruptcy Court or a Bankruptcy
Trustee.
Truth: No way! The Court
system is designed for “the people”
… it’s just where many attorneys
earn their living. If you’re filing
for bankruptcy, we certainly recommend that
you do so through an attorney, but if you’re
just trying to purchase a home involved
in bankruptcy, you can do it on your own.
Further, the Trustee is an officer of the
court whose responsibility is to protect
both creditors and debtors. As a potential
purchaser of a property under the control
of a Trustee, you can certainly contact
that Trustee and walk through the process.
Myth #4: If there’s any equity
in a house, the Court won’t allow
me to buy it.
Truth: Indeed, one of
the Court’s responsibilities is to
evaluate the debtor’s estate and see
how as many creditors as possible can be
paid. But there’s a big difference
between a house having enough equity for
the Court/Trustee to want to go to the trouble
to sell it and a house having enough equity
for a real estate investor to find a good
deal. For example: (a) The Court will have
to factor in a Homestead Exemption payment
to the debtor (a real estate investor doesn’t
have to do that). (b) The Court will also
have to factor in “yellow pages”
prices for any necessary repairs (most investors
have less expensive resources). (c) The
Court will be selling the house through
a full-service realtor, who will be charging
a 6% or 7% commission, whereas an investor
may use a “flat-fee” listing
service or want to keep the house as a rental.
(d) The Court doesn’t have the opportunity
to negotiate a “short-sale”
with the lender(s) and we all know that
investors can make TONS of money in the
“short-sale” market.
Myth #5: There are no pretty houses
in bankruptcy.
Truth: People with nice,
expensive houses get in financial trouble
just like folks with more modest or “ugly”
houses. In fact, some of the biggest deals
Mark and I have done have been with VERY
nice houses in VERY nice neighborhoods!
In fact, we’ve each had the opportunity
to do “short-sale” purchases
on homes in the $300,000 - $400,000 range.
Myth #6: There are no investing opportunities
for houses in bankruptcy … mortgage
balances are too high.
Truth: This issue was
dealt with briefly in Myth #4, but there’s
more to know. In fact, because of the circumstances
leading most debtors to file bankruptcy,
there may be MORE opportunities in bankruptcies
than elsewhere. Four of the reasons for
the many opportunities are: (a) Most investors
are afraid to deal with a bankruptcy …
or don’t know how … there is
less competition … where there’s
less competition, there’s more opportunity!
(b) We’ve heard all sorts of figures,
but (conservatively) 70 – 80% of all
Chapter 13 payment plans fail … which
leads to extremely motivated sellers! (c)
Many debtors were facing foreclosure when
they filed bankruptcy so when they realize
they may not make it through the bankruptcy,
they often realize they have run out of
options and they MUST sell their house to
avoid foreclosure. (d) Mortgage companies
that loaned money to these debtors have
really been drug through the legal system
… foreclosure, bankruptcy, then back
to foreclosure … so the mortgage companies
can also be extremely motivated to negotiate
a “short-sale” so they don’t
end up owning the house via foreclosure.
Yet ANOTHER opportunity for the real estate
investor.
These are just some of
the many myths surrounding bankruptcies
and the many unknown opportunities for real
estate investors. A little education can
go a long way if you can see the incredible
profits available in this niche market!
Caryn McKinney and Mark Klee originally partnered in 2002 to create www.PostBankruptcyReport.com. Now they are a national voice on investing in bankruptcies. At the request of their subscribers and others, they have developed quality training materials and seminars to promote this incredible investment opportunity as well as provide the important educational component. Their simplified and detailed information includes everything you need to know as a real estate investor wanting to purchase homes in the bankruptcy niche market, including showing you how to access the hottest leads coming out of bankruptcy! Now you can enjoy the same amazing profits as Mark and Caryn reveal all their secrets.
Click
here to learn more about our Post-Bankruptcy
Report!
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