Chapter One I will never forget this day; it must've been 10 or 12 years ago. I had an elderly couple come into my office, and they wanted to purchase a home. Looking at his salt-and-pepper hair, I figured they were in their early 60s. They told me they had been renting all their lives and now wanted to purchase a home. I was thinking that if they only knew how powerful real estate is, meaning that you can make a lot of money from it, they would have probably purchased their home when they were in their 20s. If they purchased their home when they were in their 20s, their mortgage would most likely be paid off by now, and they would be living there for free, except for paying property taxes and insurance. They would most likely have an asset worth a couple hundred thousand MOTIVATED SELLERS 3 dollars or more. For some reason, this couple never thought about purchasing a home when they were younger. There are many people today who wait until their 30s, 40s, or even their 50s to purchase their first home. This is wrong; the sooner you purchase your 1st home, the sooner you will make yourself wealthier. Real estate will make you rich, not only by buying investment properties but also by buying your own home as a residence. This is my point and the purpose of this book. Your home is an investment, and you can make hundreds of thousands of dollars from it once you understand the power of real estate. In the past, people were taught to purchase their homes and stay there for many years. Today's generations move way more often than in the past. Look at your parents; they probably lived there for many years. There's nothing wrong with that, and they most likely have a lot of equity in the house, which is nice. My parents purchased their home in the early 1970s, and they paid $32,000 for it, but when MOTIVATED SELLERS 4 they sold it almost 30 years later, they received $209,000 for it, a profit of $177,000. Back then, that was a lot of money; it's a lot of money today, but it took them 30 years to make that money. What if you can make that money in a lot shorter time? How would you like to speed up the process? Instead of waiting 30 years, you can do it in a few years. You can by purchasing your home below market value, you can make $100,000 or more right from the start, and you don't have to wait years or decades. What if you did this every few years, the profits would be tax-free (if you lived in your home for two years out of the last five years, $250,000 of your profit is tax-free, $500,000 if your spouse is on title), and this can make you very wealthy (I'm not an accountant, please advise with legal counsel). I want you to think about this for a moment: suppose you purchase a home below market value, and two years later, you sell it for a profit of about $100,000. Now, remember this is tax-free money. And just for kicks, you MOTIVATED SELLERS 5 decide to buy another home. After two or three years, you decide to sell this one also, and you walk away with a total profit of, let's say, $150,000. In a short time, you made about 1/4 million dollars, all tax-free. Sounds interesting, right? Is it starting to make you think? Before I show you why people in the past purchased homes wrong, let's look at a few myths that should be taken care of first. From the start, most people were taught to save up a lot of money for a down payment. Yes, most people in the past did need a large down payment for a home. Today, there are government mortgages that require as little as a 3 1/2% down payment, and other loans like the VA loan offer a zero down payment option. You also have conventional loans that have down payments as low as 3 to 5%. In the past, most homebuyers needed a 20% down payment. Most of my clients get into their homes with very little money down. You might be asking, what if I don't have three or 5% for a down payment? Does that mean I MOTIVATED SELLERS 6 can't purchase a home? You can still be able to purchase a home, but you will need help with grants or closing cost assistance from your county or state. Most homebuyers today don't realize you can get grants or closing assistance from your county or state to help you get into a home with less money. There are other creative ways to get in there for very little cash, which I will show you in later chapters. At the same time, we are taught to get a good job so we can qualify for a mortgage. Again, most people think they must be on the job for a couple of years to get the mortgage. We are told we need to be on our job for a year or longer. Once again, this is wrong. It helps if you have been on your job for over a year, but there are other mortgages you can use if you lack the I-year requirement. One thing I want you to understand right from the beginning is if you want to purchase a home, you can. Don't let any obstacles or any person stop you. There are many options to get you into a home that years ago was not possible. MOTIVATED SELLERS 7 This brings us to two key points why homeowners in the past purchased their homes wrong: 1) Homeowners pay fair market value for their homes and don't have any equity. 2) The home they just purchased is not their perfect home; there are always some changes buyers would prefer to make before moving in. If you don't believe that last statement, ask people who purchased their home if they had a choice. Would they have done anything different to the house before they moved in? Regarding the first reason why homebuyers purchased their homes wrong, you must look at how they purchased in the past. With most people, what they did was go out and talk to a lender and get preapproved. Then they call up a realtor to look at some houses. They might look at 15, 20, or even 30 homes or more. If they see one they like, they'll purchase it and end up, usually, paying fair market value for it. This is the way most homebuyers purchased a home in the past. MOTIVATED SELLERS 8 In the past, as just stated, the real reason why homebuyers purchase homes wrong is that they pay fair market value for it. That is how 98% of the population purchase homes. It is not a smart way; they have no equity in their home. What if they need some emergency money, or money for car repairs or maybe a new furnace that there's no money to tap into? The banks will not give you any money whatsoever because there's no equity in your home. This is how your parents and grandparents purchased their homes. This is how most people in America purchased their homes today. People have been doing this for decades, purchasing homes just like this. We are all brought up thinking we need a realtor, look at many homes, find the one that we like, and then purchase it, which most times will be at fair market value. You might be asking why more homebuyers don't purchase homes below market value. There could be many reasons why, such as they don't know where to look, maybe they are MOTIVATED SELLERS 9 not aware that you can purchase homes below market value, or maybe they listen to the realtor and purchase one of his/her homes. Keep this in mind: most realtors don't even know how to find homes below market value. Besides, their job is to show you homes that are on the market selling at fair market value; that's how they make their money. Consider this: we know everybody loves sales, and people are always looking for sales to save money regardless of what their purchase is. Take, for example, when most people purchase a new car, they look for some sale; maybe they are looking for a lower interest rate, some rebate, or whatever they can get to get a better deal on their new car. Or if they want to purchase a major appliance, they wait for sales; that's what we were taught in the past. We were told to be smart with our money and to purchase something when it's on sale. But when it comes to purchasing a home, they go out with their realtor to find a home they like and purchase it. They don't look for sales MOTIVATED SELLERS 10 or bargains because most people don't know where to look or what they are called. When a car goes on sale, you see it on TV or read about it, but when the house goes on sale, most people don't know where to look. The reason is that when a house goes on sale, it goes by another name, such as a motivated seller, foreclosed home, short sale, auction, etc. All these homes you can purchase on state, and you can get them as much as $50,000, $100,000 or more below market value. When many people see a foreclosed home or hear a seller is getting a divorce and needs a quick sale, they think the home is going to need a lot of work. Sometimes, this is true; other times, it's false. Some houses could be in excellent shape and ready for immediate occupancy. Other homes might need work, but don't let that scare you; that's how you get homes $100,000 or more below market value, which will make you rich in the long run. These are the homes you are looking for, and I MOTIVATED SELLERS 11 will show you how to get the money through a mortgage to get your home renovated. With today's technology, finding a home and getting into it is easier than ever. You have websites such as Zillow, Realtor.com, Redfin, etc., which were not around years ago. Today, you can find homes below market value using these sites. Once you learn the basics of how these websites work, which you learn in the next few chapters, you will find many homes below market value, and you will be on your way to financial freedom. Don't get me wrong now, finding a home around $100,000 or more below market is a home run, but it will take longer than finding a home at $25,000-$40,000 below market. These homes are a lot easier to find. They come a dime a dozen, and you're still making some decent money on them. Another reason paying fair market value is wrong is if you have to sell within a few years, this could cost you a lot of money. Let's say you have to move quickly because of health MOTIVATED SELLERS 12 reasons, move closer to family, or a divorce; there can be a million reasons why you have to move, and Statistics show there is a good chance you will need to bring money to the table to get out from underneath the home. What that means is you may have to come to the settlement table with money to pay off your mortgage. Realtors are the main reason for this. They won't charge you when you're looking to purchase a house, but when you sell your home, they're going to charge you 5%, 6%, or maybe more of the purchase price. Let me give you an example. let's say two years ago, you purchased a house for $290,000, and you're selling it today for $300,000. Since you have been paying down your mortgage for the last two years, you might owe around $277,000 (including your down payment, assuming a 3.5% FHA downpayment). If you add up all your fees, realtor fees, closing costs fees, settlement fees, etc., it can be as high as $35,000. At settlement, after you pay your fees of $35,000, it leaves you with $265,000, but you owe a mortgage of $277,000, which MOTIVATED SELLERS 13 means you have to bring $12,000 to the settlement table to sell your house. Just think of all the work you had to put into finding that house, and all the maintenance and repairs you put into the house while you lived there, as well as paying two years' worth of your mortgage. If your mortgage payment is $ 2,000 a month, that means you paid about $48,000 to live in that house (at the beginning of a mortgage, most of the payment goes towards interest, some towards insurance and taxes). Read that last paragraph again. You had to pay $48,000 to live in your house for the past two years, and when you go to settlement, you have to bring $12,000 more to get out from under the house. It doesn’t make any sense to me, and yet it happens all the time. The point here is you don't want to pay fair market value for a house since you might have to bring money to the settlement table if you need to sell your house in the first few years. In the example I gave earlier, instead of selling MOTIVATED SELLERS 14 your home for 300,000, maybe you decide to sell it for $310,000, or maybe the market is bad, and you put it up at $290,000. Either way, you take a big gamble when you pay fair market value for a home, and you need to sell your home in the near future. I have seen people bring as much as $27,000 to the table to get out from underneath their homes. If you purchase below market value, say $50,000, $100,000 or more below market, you should never run into this problem. It is one reason for many to purchase below market. The second reason why people purchase homes wrong is in the past, and they never purchased their dream home. Most people spend many hours looking at many homes to find a perfect home. They could spend months or years looking for their home, but the reality is they will never find their perfect home; they might come close but won't exactly get what they want. Just ask your parents or anyone else who has purchased a home recently. They might love their home and the area they are in, but MOTIVATED SELLERS 15 there's always something that they would change if they could. Statistics show when homeowners purchase a home, many of them go out and make repairs or improvements to their new home, proving they did not get their perfect home. It's rare, if not impossible, to find your dream home by visiting 20 or 30 homes or more. There is always something that you would want to change. It might be hardwood floors, paint, kitchen, bathroom, etc.; you get the point. There is always something we want to change. If you do want to get your dream home, there are only two ways to get it. One way is through new construction, where you tell the builder exactly how you want your house to be built. The other way is to have your house renovated exactly the way you want it. Those are the only two ways to get your dream home. The problem with new construction is that it can take 4 to 7 months to have a house built, and you're paying fair market value for it. It's nice to have your dream home, but if you need MOTIVATED SELLERS 16 to take out money for any reason, such as for a vacation, bills, a new car, etc., you can't take any out because there's no equity there. The best way to get your dream home is to purchase below market value and have it totally renovated the way you want it to be. It's just like a new construction house, and the only difference is that you take an existing home and renovate the inside of it the way that you want it. These are the homes you want to purchase. I will show you how to find and get these homes way below market value and how the government will give you the money to renovate your home the way you want it. Sounds good, right? The more the home is below market value, the more work will probably be needed. That's fine, and that's what you're looking for taking an ugly house and turning it into your dream home. Now, you will have your dream home, and you will have plenty of equity in the home that you can tap into if needed. Can you picture the fact that you're in a beautiful home and you have plenty of equity if you need it. MOTIVATED SELLERS 17 What if you could find your home $60,000, $100,000, $150,000, or more below market value and get the house renovated the way that you want it — the kitchen you've always wanted, the hardwood floors, the large deck you've always wanted for those large family gathering, etc. — doing all of these with very little cash out of your pocket. How is that going to make you feel? Close your eyes and think about living in the home you always wanted to live in and having plenty of equity in the home. It's a very good feeling; this is the correct way to purchase a home. When you purchase a home below market value and have it renovated, you purchase your home the smart way. You have equity in the house that you can tap into if you need to. Also, you're going to get your dream home, everything that you ever wanted in the home you can have. You will soon learn there is a mortgage that will give you the money to make all the renovations that you need to have done. It's totally amazing; you get into your home with very little cash out of pocket, and you get MOTIVATED SELLERS 18 money from the mortgage company to make your renovations. Let's end this chapter with me summing up the highlights. Purchasing a home is an investment; you want to get below market as much as you can, even if it's $30,000 below market value. I will show you how easy it is to find these homes; they are all over the place. But your goal should be around $100,000 below market value or more. This way, you can renovate your home the way that you like, and you will have equity left over. If you purchase a home below market value, it will make you financially secure a lot quicker than someone who pays fair market value. Also, if an emergency comes up, you can always take out a line of credit or a second mortgage to have extra money to pay for these emergencies. Remember, when you pay a fair market value, you don't have this luxury; you can't take any money out. Another disadvantage of purchasing at fair market value is if you need to sell your home MOTIVATED SELLERS 19 in the near future. Let's assume you get another job, and it's out of state. There might be a good chance you will need to bring money to the settlement table in order to sell your home when you include real estate commissions, closing costs, etc. It's not a good situation to be in. Here is the one I love; I heard this so many times, and you might also have. When people move to a different state, sometimes they might say, "Let's rent first to see if we like it there". I say that's crap; the correct way is to purchase a home below market value, and if you decide you don't like it there anymore, sell it and walk away with a nice profit. I feel bad for people who rent for years to find out if they like the place before purchasing, only if they knew how to purchase below market value. You want to purchase like the 2% of people who purchase below market value. If you are going to take the time to find a home, you might as well find one below market value. Your goal is to find your home below market MOTIVATED SELLERS 20 value; $30,000 to $50,000 is nice but aim for at least 100,000 below market value or more. If you're looking for financial freedom, it will take work. It's not hard work, but you need to spend some time looking for your home in the right areas. Those websites I just mentioned are only one way of many to find your home. Throughout this book, I will show you there are many ways you can find your home that is way below market value. Keep this in mind, though: if you're not looking to put the work in, you won't find a good deal, and you won't make as much money. This is the goal when purchasing a home: get it below market value. Your aim should be at least $100,000 or more below market. MOTIVATED SELLER