. 6
( 7)


tions during this pre-foreclosure phase. We did not want to pay any-
where near $93,000 for this property. We couldn™t find anyone else who
wanted to pay that much for the property either.
Because the property was vacant, we were able to bring five differ-
ent investor groups through it in a week™s time. All were in the buy, fix,
and flip business. This property definitely needed fixing. We had esti-
mates from these five investor groups from a down-and-dirty $10,000
quick fix to $30,000 to $35,000 to do it right.
We also had prices that the investors would pay for the property in
its as-is condition that ranged from $70,000 to $85,000. Surprisingly
enough, the investor who said he would only put $10,000 into the prop-
erty to fix it was the same investor who would only pay $70,000 for the
The retail value of the property fixed up would be $125,000. If you
do the math, it doesn™t make sense. Once you pay the lender $93,000 for
the property and spend $35,000 to fix it, you are already upside down in
the deal. You would have to sell the property at above the retail price of
$125,000 just to break even. That was not very likely to happen. We told
our contact person with the lender to forget about it.

Upside-Down Deal
Retail Value $125,000
Lender Payoff $ 93,000
Fix-Up Costs $ 35,000
Loss ($ 3,000)
The REO Department 207

Foreclosure Sale

Needless to say, this property went to the foreclosure sale. The lender
made the credit bid of $93,567.23. No one else bid. The trustee awarded
the lender a trustee™s deed. The lender now owned the property.
The next day we called our contact person at the lender. We asked
what the REO department was going to sell the property for. He told us
it was going to list the property with a real estate broker for $85,000. He
also told us that the price was negotiable!
The price had dropped over $8,000 in one day. So much for getting
a good deal at the foreclosure sale! But we already told you that there are
deals to be had once a property goes from the foreclosure sale unsold
back to the lender as an REO.

REO Offer

This property had now become a saga for us. We had found it in the pre-
foreclosure phase. We had tried to put together a deal with the owners.
We were successful in getting the owners to work with us for zero net
dollars to them. They had no equity in the property. They just wanted
our help in walking away from the property.
Our deal with the owners was contingent on working something
out with the lender. We were going to flip the property to another real
estate investor. We were trying to negotiate the lender down on its loan
payoff so there would be some room for us to make a profit. When the
lender wouldn™t come off the $93,000 payoff, we couldn™t make a deal in
the pre-foreclosure phase.
We now made an offer of $70,000 all cash for the property. We
didn™t want to buy the property for $70,000. We wanted to control the
property for $70,000. We were not interested in coming up with
$70,000 cash. We would leave that to the investor to whom we assigned
our contract.
We submitted our offer through our contact person in the REO de-
partment. Our offering price wasn™t a big bone of contention. The
lender simply countered at $80,000. We countered their counteroffer
with $73,900, and they accepted.

Our Offer
Lender List Price $85,000
Our Offer $70,000
Lender Counteroffer $80,000
Our Counteroffer $73,900

However, the lender was unwilling to allow us to assign our con-
tract. We felt we would be able to work out an acceptable price to an-
other investor. If we couldn™t get the lender to allow us to assign our
contract, then we would have no deal.

The Unassignable Contract It has been our experience that there is
no such thing as an unassignable contract. But the toughest contracts to
assign are the ones from lenders after they have foreclosed on a loan and
are reselling a property.
REO properties are the source of some of our most profitable in-
ventory. However, lenders are just as hoodwinked as the rest of us when
it comes to listening to attorneys. They allow their attorneys to put the
dumbest things in their REO contracts. Remember, our position on any
contract is that the purpose of the contract is to communicate.
Real estate attorneys, just like other attorneys, make money by
keeping people from communicating. The following is actual verbiage
taken from the lender™s REO contract that their attorneys included.

“Buyer shall neither assign its rights nor delegate its obligations
hereunder without obtaining Seller™s prior written consent, which
may be withheld in Seller™s sole discretion. In no event shall an
assignment relieve Buyer from its obligations under this Con-
tract. Any other purported or attempted assignment or delega-
tion without obtaining Seller™s prior written consent shall be void
and of no effect.”

Needless to say, this paragraph was unacceptable to us. How did
we get around this affront to our investor sensibilities? Did we get the
lender™s prior written consent before we wrote an offer? No, we did not.
Our contact person gave us a clue.
The REO Department 209

We wrote the offer as trustees of a trust. As such, we were speaking
the language the lender could understand. We did not know when we
wrote the offer which trust was actually going to buy the property. The
lender accepted our offer as Chantal Carey or Bill Carey, trustees and/or
assigns. We assigned the lender™s unassignable contract within seven
days after our offer was accepted for $79,900.
While this was a lot of work for the relatively small amount of
money we made, we were happy. We had tried so hard to make this deal
work at each of the four phases of the foreclosure process. To finally
have something work in the last phase was very gratifying for us.

Our Profit
Sales Price $79,900
Purchase Price $73,900
Our Profit $ 6,000

We must say that dealing with REO lenders and their attorneys is
very difficult. You must legitimately be a trustee before you can write
and present contracts as one. We do not recommend this technique if
you are just starting out in the foreclosure business.
For those of you who are more advanced or are trustees of trusts
and want to consult with us for more information, contact us through
our e-mail address, thetrustee@hotmail.com. You must fully identify
yourself, or we will not open the e-mail or respond to it.
In the next chapter we will talk about the paperwork, escrow, and
title insurance involved in the foreclosure arena. We admonish people to
never buy real estate without checking the property title. This can be es-
pecially important when you are buying foreclosures. There are excep-
tions to our rule.
We do know of an investor, for example, who bids on properties on
the courthouse steps and does no preliminary research on either the
condition of the title or the property. After he wins a bid, he goes inside
the courthouse and checks the condition of the title. At the same time
he has a partner do a drive-by inspection of the property.
He takes advantage of the two-hour window the foreclosing trustee
allows for the winning bidder to produce the cash or cashier™s checks. If
the property looks like a bomb, he backs out of the deal. If he discovers
problems too great for him to handle with the title to the property, he
backs out of the deal.

Paperwork, Closing, and Title
There are no oral agreements in real estate. Everything must be in writ-
ing. Once you have written a contract, you have to present it to the
seller. By presenting your offer correctly, you have a better chance that
your deal will be accepted.
We will show you how to write an offer that will get you a great
deal while, at the same time, protect you from winding up in a lousy
deal. We will show you how to present your offer in such a way that the
seller will see the advantage for him- or herself in accepting your offer.

Writing Your Offer

Technically, you can agree to buy someone™s property, and they can
agree to sell it to you without a written agreement. But if a dispute arises
between you and the seller and you wind up in front of a judge, the case
will be thrown out as soon as the judge discovers there is no written
Every state has a statute of frauds that says for a real estate contract
to be valid it must be in writing. If there is no writing, there is no valid-
ity. If there is no validity, there is no contract. Especially in the foreclo-
sure arena, protect yourself by having everything in writing.


CoCa CoLa Besides the requirement that for a real estate contract to
be valid it must be in writing, the contract must meet four other re-
quirements. We call this the CoCa CoLa test. We are not promoting or
advertising a soft drink but are using CoCa CoLa as a memory aid.
Once you understand the four requirements for a valid contract, you
will always use the CoCa CoLa test to make sure all the requirements
are present.
Consent: There must be mutual consent between the parties to the
real estate contract. The parties have to agree about the wording and
conditions written in the contract.
Capacity: The parties to the real estate contract must have the ca-
pacity to enter into the contract. This means the parties have to be of
sound mind (competent) and of legal age (18 in most states). There are
some exceptions to the age requirement, such as being married, or being
married and then divorced, being in the military, or being an emanci-
pated minor.
Consideration: This is anything of value that influences a person to
enter into a real estate contract. It could be money, a deed, a service, an
item of personal property, an act (including the payment of money), or a
promise (including the promise to pay on a loan). If the consideration is
an act or service, that act or service must be performed after the parties
enter into the contract. Typically, consideration accompanies the con-
tract in the form of a promissory note or check. Without consideration,
the contract is not valid.
Lawful: For the real estate contract to be valid, the promises made
between the parties and the consideration given must be legal.

Types of Contracts There are many types of real estate contracts. We
are going to show you the four contracts we use for our own real estate
investing. The purpose of the contract is to communicate. We believe
the simpler the contract, the better the communication between the par-
ties to the contract.

Letter of Intent A letter of intent is our homage to the original one-
page real estate purchase contract. You can write anything you want to
convey your intent to the seller that you are interested in purchasing the
property. A letter of intent is not technically a valid contract, but it does
meet our requirement that a contract communicate.
Paperwork 215

To The Owners of 711 Lucky Street, Oceanside, California:


We intend to make a cash offer on your property within the
next 24 hours. In the event you receive another offer before
we have had an opportunity to present our offer, we request
you give us the first right of refusal and allow us to present
our offer before you accept any other offer.


Chantal & Bill

Option Contract An option contract goes beyond a letter of intent.
More than conveying your intent to buy a property, an option contract
says you are buying the property within a certain time frame. Also, you
will commit funds in the form of an option fee or option money”basi-
cally, a deposit”to keep the option open.
Once the option has been agreed to, only the buyer can exercise
the option.The seller can™t back out of the deal if the buyer exercises the
option. The buyer can back out of the deal and not be sued for specific

Purchase Contract A purchase contract is the basic agreement be-
tween you and the seller for purchasing the property. Many variations of
purchase contracts exist. You can check with local Realtors or title in-
surance companies to obtain a copy of the type of purchase contracts
used in your area. We have included a standard purchase contract in Ap-
pendix C.
Purchase contracts have been designed to have standard writing”
a boilerplate”to be used in all types of transactions. The blank lines and
spaces in the contract are to be used by you to customize your particu-
lar deal. We recommend you always stipulate that your offer is contin-
gent on the approval of your money partners.

Remember, regardless of the type of purchase contract you use, the
purpose of the contract is to communicate. The more straightforwardly
the purchase contract states your intentions to the seller, the easier it
will be for the seller to understand what you are trying to do with your
offer. If the seller understands what you are trying to do with your offer,
then it is more likely he or she will be predisposed to accept your offer.
In other words, the simpler your purchase contract is, the better.

Assignment A real estate assignment allows you to take any contract
and make Quick Cash by assigning your interest in the contract to some-
one else for a fee. The important part is for you to write every real estate
contract with the clause “and/or assigns” as part of your name in the
buyer™s name section of the contract. This will give you the right and
ability to assign a contract of whatever kind to another buyer for a fee.

Presenting Your Offer

The purpose of presenting your offer is to have the seller accept it.
There are three responses a seller can have to your offer. The seller can
accept your offer. The seller can counter your offer. The seller can reject
your offer. If the seller accepts, you have a contract. If the seller coun-
ters, you have something to work with. If the seller rejects and says no,
you may be at a dead end. You don™t want the seller to say no.
You begin building rapport the moment you start an interaction
with a person. We have found that smiling at, being respectful toward,
and being complimentary to a seller builds rapport. You also have to be
energetic and upbeat when you interact with a seller to instill the belief
that you can get a real estate transaction done.
We go into every transaction with a seller with a win-win attitude.
We want the seller to win, and we want to win.You will find that as a real
estate investor, getting a good deal is easy. You just have to ask. When we
make an offer, we want to get a good deal. We find that when we get a
good deal, we are solving a problem for the seller”especially the seller in
the foreclosure process. That makes it a win-win for the seller and for us.

Where to Present Your Offer Always present your offer at the
seller™s kitchen table. Arrange to sit at the head of the table with your
back to an outside wall. You want the seller™s attention focused on you,
not what is going on in the rest of the house.
Closing 217

By presenting your offer at the kitchen table, you convey that this is
a business situation. If you present the offer in the living room, it con-
veys a social interaction. Ask that televisions and radios be turned off.
Do not accept an offer of food. Accepting an offer of a beverage (nonal-
coholic) is fine.

When to Present Your Offer Present your offer within 72 hours of
seeing the property for the first time so you will convey a sense of ur-
gency and interest to the seller. Sellers want to know if you are a serious
buyer. Serious buyers take action in a timely manner. When you are
working with the owner in pre-foreclosure, we recommend you make
your offer after you make the foreclosure options presentation.

In our Quick Cash in foreclosures system, you may wind up receiving
money directly from another real estate investor without going to a clos-
ing.You could be flipping a property before the closing.You could be as-
signing a purchase contract or an option contract to another investor,
who will then go to a closing with a seller. You will get a feel for when
you will go to a closing and when you will not.


Understanding how the escrow closes can make you comfortable with a
process many buyers and sellers find very confusing. Escrow is a type of
closing in which you and the seller deposit money and/or documents
with a neutral third party”the escrow holder. You and the seller give
the escrow holder instructions to hold and disburse documents and
funds after certain conditions are met.
An escrow is complete when all conditions listed in the escrow in-
structions are met and all acts specified in the instructions are per-
formed. When an escrow is complete, the escrow holder disburses the
funds and documents to close the escrow.
In its simplest format an escrow would have the buyer put the
money in the escrow account at the opening of escrow.The seller would
take the money out of the escrow at the closing of the escrow. The seller

would put the deed to the property in escrow at the opening of the es-
crow. The buyer would take the deed to the property out of the escrow
at the closing of the escrow.
Many things are occurring during the escrow period: termite in-
spections, physical inspections, money partner inspections, geological
inspections, title searches, procuring hazard insurance, obtaining financ-
ing, preparing loan documents, calculating closing costs, preparing
deeds, and so on.

Opening an Escrow Consider choosing an escrow holder who is
willing to take the time to explain what is happening and what you need
to do. Choose a company that is located a convenient distance from
where you live, so you can sign and deliver documents or money easily.
Depending on your area, the party that acts as the escrow holder
can include independent escrow companies, escrow departments of
lending institutions, title insurance companies, real estate brokers, and
real estate attorneys. You may find that your area does a closing with an
attorney rather than conducting an escrow.

The Buyer™s Day The day the escrow closes is considered the
buyer™s day. What this means is that all the prorations of property
taxes, hazard insurance, mortgage interest, and property rents are fig-
ured on this day.
Let™s say the escrow closes on the 14th day of the month. The seller
is responsible for paying the property taxes, hazard insurance, and mort-
gage interest through the 13th day of the month. If the property is re-
ceiving rental income, the seller is entitled to receive a prorated share of
the monthly rent through the 13th day of the month. This is because
rents are paid in advance, usually on the first day of the month.
The buyer is responsible for paying the property taxes, hazard in-
surance, and mortgage interest starting on the 14th day of the month. If
the property is receiving rental income, the buyer is entitled to receive a
prorated share of the monthly rent from the 14th day of the month until
the end of the month.

Closing Statement Once the escrow closes, a closing statement is
prepared by the escrow holder.The closing statement is set up as a debit
and credit accounting. The purchase price appears as a credit to the
seller and a debit to the buyer. Any rental security deposits will be cred-
ited to the buyer and debited to the seller. Everything else will be pro-
Title Insurance 219

rated as a debit and a credit to the seller and buyer, respectively, based on
the day of closing.

Title Insurance
If you buy property, get title insurance. Never buy property without title
insurance. What is title insurance? Title insurance is a policy of insur-
ance issued to you by a title company on completion of the final title
search, which protects your title to property against claims made in the
future based on circumstances in the past.
Title insurance is especially important when you are investing in
foreclosures. Liens and encumbrances against the property title tend to
mushroom during the foreclosure process. Besides the foreclosing
lender, there may be tax liens, lawsuits, and other creditors with interests
against the title to the property.

Title Search

A title search is an examination of information recorded on a prop-
erty, or the owner of the property, at the county recorder™s office in
the county in which the property is located. The examination verifies
that the property will have no outstanding liens or claims against it to
adversely affect a buyer or lender when the title to the property is
transferred to a new buyer or pledged as collateral for a real estate
When you are buying property, especially a foreclosure property, it
is always a good idea to get a preliminary title report from a title insur-
ance company. The preliminary title report is usually produced by the
title company during the escrow or closing. The purpose of the prelimi-
nary report is to make everyone”buyer, seller, lender, escrow holder,
title company”aware of the condition of the title involved in the trans-

Owner™s Policy An owner™s policy of title insurance protects the
owner of record from claims against the title brought by other parties. If
a claim arises and you have title insurance, and any monetary damages

are to be paid, the title insurance company will pay them. By the way, the
seller or buyer can pay for the owner™s policy.

Buyer™s Policy A buyer™s policy of title insurance protects the buyer
of real estate. The buyer™s policy is similar to the lender™s policy in that it
protects the buyer for matters beyond what is in the public record. Al-
though the buyer becomes the owner and is protected by the owner™s
policy, a buyer may decide to get extended coverage. We recommend
getting buyer™s coverage any time you are involved in a foreclosure trans-

Lender™s Policy A lender™s policy of title insurance protects the real
estate lender beyond matters of public record.There may be unrecorded
liens against the title. Lenders want to be protected against everything
because they have so much money loaned on the property. Typically, the
lender makes the buyer who is using the loan proceeds to complete the
purchase of the property pay for the lender™s title policy.

Congratulations on completing Quick Cash in Foreclosures. We know
you have a lot of material to digest. Our hope is that we have stimulated
your interest in making money in foreclosures.
Our recommendation is for you to go back to the areas that are of
the most interest for you. Please reread them. Then get started. Look at
property. Schedule an appointment with an owner in pre-foreclosure.
Make a foreclosure options presentation.
Write an offer. Flip a property or a contract. Assign something.
Control a property with an option. Go to a foreclosure sale. Our point is:
Do something! Make some money.
We are always coming up with more creative possibilities for in-
vestments and problem solving. So, as we bid you adieu, we have this to
say to you: Get creative! Pull a group of people together and contact us
for a seminar.
Are you a lone ranger right now? You won™t be for long when you
start investing in foreclosures. Meanwhile, you can e-mail us for fee-
based consulting. We are always open to new possibilities, so let us
know if you need a partner. Get out there and do something now!
Conclusion 221

Let us know what did or didn™t work for you. We want to hear
about your experiences in the foreclosure arena. You can contact us
through our publisher, e-mail us at thetrustee@hotmail.com, or write to
us at P.O. Box 274, Bedford,TX 76095-0274.
Remember to watch for more of this Win Going In! series. The first
book in the series was The New Path to Real Estate Wealth: Earning
Without Owning. Quick Cash in Foreclosures is the second book in the
series. The third book will be on investing in tax liens and will come out
in the spring of 2005. God bless y™all!
”Bill & Chantal Carey

Deeds Chart
G = Grant deed is a deed using the word grant in the clause that awards
ownership. This written document is used by the grantor (seller) to
transfer title to the grantee (buyer). Grant deeds have two implied
warranties. One is that the grantor has not previously transferred
the title. The other is that the title is free from encumbrances that
are not visible to the grantee. This deed also transfers any title ac-
quired by the grantor after delivery of the deed.
W = Warranty deed is a deed in which the grantor (usually the seller)
guarantees the title to be in the condition indicated in the deed.
The grantor agrees to protect the grantee (usually the buyer)
against all claimants to the property.
* = Special deed.

State Deeds State Deeds State Deeds
Alabama W Louisiana W Oklahoma G
Alaska W Maine W Oregon W
Arizona G Maryland W Pennsylvania G
Arkansas G Massachusetts W Puerto Rico *
California G Michigan W Rhode Island W
Colorado W Minnesota W South Carolina G & W
Connecticut W Mississippi W South Dakota W
Delaware G Missouri W Tennessee W
District of Columbia G Montana G Texas G
Florida W Nebraska W Utah W
Georgia W Nevada G Vermont W


State Deeds State Deeds State Deeds
Hawaii W New Hampshire W Virginia G
Idaho W New Jersey G&W Washington W
Illinois G&W New Mexico W West Virginia G
Indiana W New York G Wisconsin W
Iowa W North Carolina W Wyoming W
Kansas W North Dakota G&W
Kentucky W Ohio W

Loans Chart
M = Mortgage, a contract by which you promise your property with
out giving up possession of the property to secure a loan.You also
retain title to the property.
TD = Trust deed, a contract used as a security device for a loan on your
property, by which you transfer bare (naked) legal title with the
power of sale to a trustee.This transfer is in effect until you have
totally paid off the loan. In the meantime you have possession of
the property.
*Mortgage preferred; trust deed also valid.
**Trust deed preferred; mortgage also valid.
***Use note to secure debt.

State Loans State Loans State Loans
Alabama M & TD Louisiana M Oklahoma M & TD
Alaska M & TD Maine M Oregon M & TD
Arizona M & TD Maryland M & TD Pennsylvania M
Arkansas M Massachusetts M Puerto Rico M
California TD Michigan M Rhode Island M
Colorado TD Minnesota M South Carolina M & TD
Connecticut M Mississippi M & TD** South Dakota M
Delaware M Missouri TD Tennessee TD
District of Columbia TD Montana M & TD* Texas TD
Florida M & TD Nebraska M & TD Utah M & TD
Georgia *** Nevada M & TD Vermont M
Hawaii M New Hampshire M Virginia M & TD*


State Loans State Loans State Loans
Idaho M & TD New Jersey M Washington M & TD
Illinois M & TD New Mexico M & TD West Virginia TD
Indiana M & TD New York M Wisconsin M
Iowa M & TD North Carolina M & TD Wyoming M & TD
Kansas M North Dakota M & TD
Kentucky M & TD* Ohio M

Appendix C 233
Appendix C 235
Appendix C 237
Appendix C 239
Appendix C 241
Appendix C 243
Appendix C 245

Abstract of title A summary of the history of ownership of a property
from public records. This history includes all changes of ownership and
claims against the property.
Acceleration clause A provision in a loan document that makes the
balance owed on a loan due and payable immediately after a speci¬ed
event occurs. The event may be missing a payment or violating another
provision of the loan.
Acknowledgment A formal declaration before a public of¬cial that
one has signed a speci¬c document.
Adjustable rate loan Adjustable rate mortgage, ARM; a loan that
allows adjustments in the interest rate at speci¬ed times based on a named
Adjustable rate mortgage See Adjustable rate loan.
Adjusted sales price As a seller, the price for which you sell your
home minus closing costs and commission, if applicable.
Agent A person authorized by another, the principal, to act for him or
her in dealing with third parties.
AITD See All-inclusive trust deed.
Alienation clause See Due-on-sale clause.


All-inclusive trust deed Wraparound mortgage, AITD; a junior
(second, third, and so forth) loan (mortgage or trust deed) at one overall
interest rate used to wrap the existing loans into a package. The amount
is suf¬cient to cover the existing loans and provide additional funds for
the sellers. Sellers pay on existing loans from buyers™ payments. Sellers
remain primarily responsible for the original loans.
Amortization Gradual paying off of the principal on a loan by
payment of regular installments of principal and interest.
Annual percentage rate APR; an interest rate that includes interest,
discount points, origination fees, and loan broker™s commission.
Appraisal An examination of a property by a quali¬ed professional to
estimate its market value as of a speci¬c date.
APR See Annual percentage rate.
ARM See Adjustable rate loan.
Assessment Tax or charge by a governmental body for a speci¬c
public improvement covering the property owner™s portion of costs.
Assessments are in addition to normal property taxes.
Assign Transfer.
Assignee The person to whom interest is transferred.
Assignment Transfer of any property to another. Delegation of duties
and rights to another.
Assignor The person from whom interest is transferred.
Assume Buyers taking over primary responsibility for payment of
existing loan. Sellers then become secondarily liable for the loan and any
de¬ciency judgment.
Assumption fee The fee a lender may charge for work involved in
allowing buyers to assume primary liability for payment on an existing loan.
Attorney A person licensed to practice law by giving legal advice or
assistance, as well as prosecuting and defending cases in courts.
Authorization to sell A listing contract allowing a real estate
professional to act as an agent in the sale of property.
Bankruptcy Relief by a court of an obligation to pay money owed
after turning over all property to a court-appointed trustee.
Glossary 251

Basis The cost of a home when purchased, including down payment,
loans, and closing costs.
Bene¬ciary The lender of money on a property used in a trust deed
type of loan.
Bene¬ciary statement A statement provided by a lender using a
trust deed type of loan that usually lists claims that do not appear on
loan documents.
Bridge loan A short-term loan to buyers who are simultaneously
selling one house and trying to buy another.
Broker See Real estate broker.
Buyer™s agent A real estate broker or sales associate who represents
the buyer in a transaction.
Buyer™s broker A real estate broker who represents the buyer.
Buyer™s market A condition in which there are more sellers than
buyers; prices generally decrease.
Call Demand payment of a debt.
Capital asset Property, both real and personal, held by a taxpayer and
not excluded by tax laws.
Capital gain Pro¬t from selling or exchanging a capital asset in
excess of the cost.
Capital improvements Additions to property that are permanent,
increase property value, and have a useful life of more than one year.
Capital loss Loss from selling or exchanging property other than a
personal residence at less than its cost.
Cashier™s check A bank™s own check guaranteed to be good by the
bank at which it is drawn.
Casualty insurance See Hazard insurance.
CC&Rs Covenants, conditions, and restrictions; a document listing
private restrictions on property. Often used when buyers have an
interest in common areas.
Certi¬cate of title A report, produced by a party providing abstracts
of titles, stating that based on an examination of public records, the title
is properly vested in the present owner.

Classi¬ed advertisements Advertisements that are separated by
type and listed accordingly.
Closing Closing escrow, settlement; the ¬nal phase of a real estate
transaction that involves signing loan documents, paying closing costs,
and delivering the deed.
Closing costs Costs of sale; the additional expenses over and above
the purchase price of buying and selling real estate.
Closing escrow See Closing.
Closing fee See Closing.
Closing statement A written, itemized account given to both seller
and buyers at closing by the escrow holder and detailing receipts,
disbursements, charges, credits, and prorations.
Commission Payments to an agent, such as a real estate broker, for
services in the selling or buying of a home.
Commitment An oral or written agreement to make a loan made by a
lender to a potential buyer.
Competent person A person who meets certain criteria set by a
state for competency. These laws often include being a natural person
who is an adult or an emancipated minor, mentally competent, and not
a felon deprived of civil rights.
Conditions Requirements that must precede the performance or
effectiveness of something else. Provisions or quali¬cations in a deed
that if violated or not performed nullify the deed.
Condominium An undivided ownership in common in a portion of a
piece of real property plus a separate interest in space in a building.
Consideration Anything of value that in¬‚uences a person to enter
into a contract, including money, a deed, an item of personal property,
an act (including the payment of money), a service, or a promise (such
as to pay on a loan). Acts or services must be performed after the seller
and the buyers enter into the contract.
Contingency A condition on which a valid contract depends.
Contingency release Wipe-out clause, kick-out provision; provisions
providing that the sellers will continue to market their home until they
receive another offer to purchase their home that does not contain the
Glossary 253

contingencies the sellers indicated or buyers remove those contingencies
the sellers speci¬ed. After the sellers receive a contract without the
detailed contingencies, the original buyers have the speci¬ed time
agreed on to remove the contingencies or the sellers may sell their home
to the buyers who offered them a contract without the contingencies.
Contract for deed See Land sales contract.
Controller ™s deed See Tax deed.
Conventional loan A loan that is not guaranteed or insured by a
government agency.
Convey Transfer.
Costs of sale See Closing costs.
Counteroffer A statement by a person to whom an offer is made
proposing a new offer to the original offeror.
Covenants Agreements or promises contained in and conveyed by a
deed that are inseparable from the property. Pledges or the performance
or nonperformance of certain acts or the use or nonuse of property.
Cram down See Short Sale.
Credit report A detailed report of a person™s credit history and rating.
Deed A document containing a detailed written description of the
property that transfers property ownership.
Deed of trust See Trust deed.
Default Failure of a person to ful¬ll an obligation or perform a duty;
failure to make a loan payment when it is due.
De¬ciency judgment A court decision making an individual
personally liable for payoff of a remaining amount due because the full
amount was not obtained by foreclosure.
Delinquent payment A payment that was not paid when it was due.
Demand fee Demand for payoff charge; a fee for a written request to
a lender for lender™s demand for payment of the loan in full and the
supporting documents necessary for release of the lien against the property.
Deposit Money that buyers submit with a purchase offer as evidence
of their intention and ability to buy.

Depreciation Loss in value from any cause.
Disclosure Making known things that were previously unknown.
Discount points See Points.
Discovery Disclosure of things previously unknown.
Divided agency Agent™s action in representing both parties in a
transaction without the knowledge and consent of both.
Down payment Money that the sellers and buyers agree on, or that a
lender requires, that buyers pay toward the purchase price before
escrow can close.
Dual agent A broker acting either directly or through an associate
licensee as agent for both seller and buyer.
Due-on-sale clause Alienation clause; an acceleration clause in a loan
giving the lender the right to demand all sums owed due at once and
payable if the property owner transfers title.
Earnest money See Deposit.
Emancipated minor A person who is under the age to legally be an
adult in the state in which they live but who has some other criteria that
allow them to function as adults. The criteria may include being lawfully
married or divorced, duty in the armed forces, or emancipated by court
Eminent domain Governments™power that allows them to take private
property for public use after paying what they feel to be a fair price.
Encumbrance A charge, claim, or lien against a property or personal
right or interest in a property that affects or limits the title but does not
prevent transfer.
Equity The part of a property™s current value that is owned and on
which no money is owed; the property™s value minus the liens owed
against the property.
Escrow A process in the transfer of real property in which buyers and
sellers deposit documents or money with a neutral third party (the
escrow holder). Buyers and sellers give instructions to the escrow
holder to hold and deliver documents and money if certain conditions
are met.
Glossary 255

Escrow instructions A written agreement between seller and buyers
that extrapolates the purchase contract into a form used as directions on
how to conduct and close the escrow.
Exclusive agency listing A listing with only one agency that
provides that if the real estate professional obtains the buyer, the seller
must pay the broker the commission. If you sell your home yourself, you
are not liable for the commission.
Exclusive right to sell listing A listing providing that during the
time listed only that broker has the right to sell your home and earn the
commission, no matter who makes the sale.
Extended coverage title insurance This coverage protects against
numerous risks that are not a matter of record.
FHA Federal Housing Administration;a federal governmental agency that
manages FHA-insured loans to protect lenders in case of default by buyers.
FHA loan Financing by having a conventional loan made by a lender
and insured by the FHA.
Fiduciary A person who is in a position of trust who must act in the
best interest of clients.
Fire insurance See Hazard insurance.
Fixed-rate loan A loan on which the percentage of interest remains
at the same rate over the life of the loan. The payments of principal
remain equal during the entire period.
Fixture Items permanently attached to or for which special openings
were made in a home and its associated structures.
Fix-up costs The expenses of improvements, repairs, and
attractiveness items.
Foreclosure The process by which a property on which a borrower
has not paid is sold to satisfy a loan against the property.
Fraud Willfully concealing or misrepresenting a material fact to
in¬‚uence another person to take action. The action results in the
person™s loss of property or legal rights.
FSBO For sale by owner; a phrase describing a homeowner selling
property without using a real estate broker.
Gift deed A deed given for love and affection.

Grant deed A deed using the word grant in the clause that transfers
Grantee Buyer; receiver of a title to a property.
Grantor Seller; holder of a title to a property.
Guarantee of title A warranty that title is vested in the party shown
on the deed.
Hazard insurance Casualty insurance, ¬re insurance; insurance
protection against stated speci¬c hazards, such as ¬re, hail, windstorms,
earthquakes, ¬‚oods, civil disturbances, explosions, riots, theft, and
Home equity line of credit Credit given by a lender based on the
amount of one™s equity in a property. The line of credit becomes a loan
secured by a mortgage or trust deed when the borrower uses some or all
of the credit.
Home inspection See Physical inspection.
Home inspector A quali¬ed person who examines and reports on
the general condition of a home™s site and structures.
Homeowner association dues Monthly fees owners of homes pay
to their homeowner association for the items it provides.
Homeowner™s insurance A policy protecting a homeowner from
liability and casualty hazards listed in the policy.
Impounds Reserve fund; funds held by the lender to ensure payment
in the future of recurring expenses. These expenses can include
insurance premiums and taxes.
Improper delivery Delivery of a deed that has not passed out of seller™s
control and/or was not delivered to buyers during the seller™s lifetime.
Improvement costs Expenses for permanent additions.
Imputed interest rate The minimum rate the IRS requires for a
seller-¬nanced loan. If the seller charges less than the minimum rate, the
IRS taxes the seller on the minimum.
Index A measurement of interest rates on which changes in interest
charges on adjustable rate loans are based.
Glossary 257

Inspection records Notices indicating that inspections have been
conducted by the proper local authorities at certain speci¬ed points in
the building process.
Inspection reports Reports by inspectors about the condition of
various aspects of your property, including defects and repairs
considered necessary.
Installment note A loan paid back in at least two payments of
principal on different dates.
Installment sale A sale that allows the seller to receive payments in
more than one tax year.
Interest A charge or rate paid in arrears (after incurred) to a lender
for borrowing money.
Interest-only loan A loan for which only the interest is paid and no
principal is repaid until the ¬nal installment.
Jointly and severally liable Liable along with other parties and
personally liable.
Joint tenancy Vesting wherein two or more parties acquire title at
the same time. Each party has an equal, undivided interest and equal
right to possess the property, including automatic right of survivorship.
Judgment Final determination by a court of a matter presented to it.
A general monetary obligation on all property of the person who owes
the money. This obligation applies in each county where an abstract of
the court judgment was recorded.
Lack of capacity Inability to enter into a contract because one is not
a competent person by his or her state™s criteria.
Landlord The owner or lessor of real property.
Land sales contract Contract for deed, real property sales contract;
an agreement in which the seller retains title to property until the buyer
performs all contract conditions.
Lease A contract that transfers possession and use of designated
property for a limited, stated time under speci¬ed conditions.
Lease option A contract that stipulates that potential buyers are
leasing a property for an agreed-on rental payment. These buyers have

the right to purchase the property before the speci¬ed future date for
the amount listed in the contract. Part of the lease payment is
considered option money toward the purchase price.
Lease purchase A contract that states that buyers are leasing the
property for the agreed-on amount and conditions. The buyers agree to
purchase the property at the agreed-on time for the agreed-on amount.
Legal description A formal description giving a property™s location,
size, and boundaries in written and/or map form.
Lessee The tenant or person who leases property from the landlord to
use it.
Lessor The landlord or owner of property who leases the property to
the tenant for the tenant™s use.
Liability Responsibility for damages to other people or property;
what you owe against an asset.
Lien A claim against a property making the property security for
debts, such as loans, mechanic™s liens, and taxes.
Lien releases Documents releasing one from monetary liability to the
party listed after fully paying that party.
Liquidated damages The amount of money the seller may keep if the
buyers default or breach the contact.
Lis pendens An of¬cial recorded notice that legal action is pending
against the title to the property.
Listing Authorization to sell; a contract allowing a real estate broker
to act as an agent to buy, lease, or sell property for another.
Loan disclosure statement A lender™s account summary required by
the Federal Truth in Lending Act.
Loan discount fee See Points.
Loan fees One-time charges by the lender for initiating a loan,
including points, appraisal, and credit report on buyers.
Loan origination fee Lender™s charge for arranging and processing a
loan, usually based on a percentage of the loan.
Loan tie-in fee A fee charged by whoever handles closing for their
work and liability in conforming to the lender™s criteria for the buyers™
new loan.
Glossary 259

Market value The amount buyers are willing to pay and sellers are
willing to accept within a reasonable time.
Marshal™s deed See Sheriff™s deed.
Mechanic™s lien A claim ¬led against property by a contractor, service
provider, or supplier for work done or materials provided for which full
payment has not been received.
MLS See Multiple Listing Service.
Mortgage A contract to secure a loan by which the seller promises his
or her property without giving up possession or title.
Mortgage default insurance Default insurance; insurance coverage
enabling the lender to receive a part of the outstanding balance in the
event the owner defaults.
Mortgagee Lender of money on property using a mortgage.
Mortgagor Property owner who borrows money using a mortgage.
Multiple Listing Service MLS; an agency to which real estate brokers
belong to pool their listings with other brokers. If a sale is made, the
listing and selling brokers share the commission.
Negative amortization Process in which payments on a loan do not
cover interest payments and the difference between the payment and
interest due are added to the loan balance.
Net listing A listing providing that the broker retain all money
received in excess of the price set by the seller.
Nominal interest rate Interest rate stated in a promissory note.
Notary fee A charge paid to a notary public to witness signatures on
some of the legal documents in a transaction.
Notice of default Warning sent to a borrower on a loan cautioning
the borrower that the payment is delinquent.
Offset statement A statement regarding a loan provided by the seller
when a bene¬ciary statement is not available.
Open listing A nonexclusive right-to-sell agreement one can make
with one or more real estate professionals. It provides that if you sell
your home yourself, you are not liable to the broker for a commission. If,
however, a real estate professional obtains the buyers for the property,
you must pay the broker the commission you have negotiated.

Option A contract to keep an offer to buy, sell, or lease property open
for a period and under the terms agreed on.
Optionee The person who gets the option on a property.
Optionor The owner of a title who gives an option.
Option to buy See Purchase option.
Payment records Checks, receipts, and written ledgers.
Payment statements Monthly stubs showing your payment date,
amounts applied to principal and interest, and remaining balance due, as
well as annual summary statements.
Permission-to-show listing A listing contract that allows a real
estate professional to show a seller™s property only to the person or
persons named in that contract. You pay the commission only if
someone on the list purchases the seller™s home.
Personal property Items that are not permanently attached to your
home or other structures on your property.
Pest control inspection Structural pest control inspection, termite
inspection; inspection for infestation or infection by wood-destroying
pests or organisms.
Physical inspection Home inspection; examination of the general
physical condition of a property™s site and structures.
Planned unit development PUD; a subdivision in which the lots are
separately owned but other areas are owned in common.
Points Discount points, loan discount fee; a one-time charge by the
lender to adjust the yield on the loan to current market conditions or to
adjust the rate on the loan to market rate. Each point is equal to 1
percent of the loan balance.
Power of attorney A document that gives one person the power to
sign documents for another person.
Power of sale clause A provision in a loan allowing the lender to
foreclose and sell borrower™s property publicly without a court
Preliminary title report Report summarizing the title search
performed by a title company or lawyer for a property.
Glossary 261

Prepayment penalty A ¬ne imposed on a borrower by a lender for
the early payoff of a loan or any substantial part of a loan.
Principal One of the parties in a real estate transaction, either the
seller or the buyers. In a loan, the amount of money borrowed.
Principal residence An IRS term denoting the residence wherein
you spend the most time during the tax year.
Probate court A court that handles wills and the administration of
estates of people who have died.
Promissory note The written contract you sign promising to pay a
de¬nite amount of money by a de¬nite future date.
Property taxes Taxes assessed on property at a uniform rate so that
the amount of the tax depends on the value.
Property tax statements Documents that the county assessor™s
of¬ce mails to homeowners itemizing the semiannual or annual tax bill
on a home and indicating the payment due dates.
Prorations Proportional distributions of responsibility for the
payment of the expenses of homeownership. This distribution is based
on the percentage of an assessment or billing period during which the
seller and buyers own the property.
Purchase contract The contract containing terms and conditions to
which the seller and the buyers agree when the seller accepts the offer
to purchase their home.
Purchase option Option to buy; the type of contract in which buyers
agree to purchase the property for the amount listed in the contract, if
they decide to buy the seller™s home and make the purchase within the
listed period of time, and agree that the seller keeps the option fee if
they do not buy the property.
Quitclaim deed A deed using the word quitclaim in the clause
granting ownership and thus releasing the grantor from any claim to that
property. A quitclaim deed has no warranties.
Real estate See Real property.
Real estate broker A real estate agent who represents another person
in dealing with third parties. This person must take required courses,
pass a broker™s exam, and be licensed by the state. A broker may employ
other quali¬ed individuals and is responsible for their actions.

Real estate professional A real estate broker or sales associate.
Real estate sales agent A person who is licensed by a state and who
represents a real estate broker in transactions.
Real Estate Settlement Procedures Act See RESPA.
Real property Real estate; land and whatever is built on, growing on,
or attached to the land.
Real property sales contract See Land sales contract.
Reconveyance deed A deed that records full satisfaction of a trust
deed“secured debt on your property and transfers bare legal title from
the trustee to you.
Recording Of¬cial entry of liens, reconveyances, and transactions
into the permanent records of a county.
Release of contract An agreement that all responsibilities and rights
occurring as a result of a contract are invalid.
Repair costs Expenses for work maintaining a home™s condition,
including replacement and restoration.
Request for notice of default A recorded notice allowing a county
recorder to notify lenders of foreclosure on a property in which the
lender has an interest.
Rescind To cancel a contract and restore the parties to the state they
would have been in had the contract never been made.
RESPA Real Estate Settlement Procedures Act; a federal law that
requires that buyers be given, in advance of closing, information
regarding their loan.
Revocation Involuntary cancellation that occurs when the time limit
has expired and one or both parties do not perform in accordance with
the terms of the contract.
Sales associate A real estate professional with either a broker™s or
sales license who acts as an agent for a broker.
Sale leaseback An agreement in which the seller sells the property to
buyers who agree to lease the property back to the seller.
Satisfaction of mortgage A document indicating that the owner has
paid their mortgage off in full.
Glossary 263

Seller buy-down loan A loan in which the effective interest rate is
bought down (reduced) during the beginning years of the loan by
contributions a seller makes.
Seller carry-back loan A loan for which the seller acts as a lender to
carry back or hold mortgage notes from buyers. These notes may be
¬rst, second, or even third loans.
Seller™s agent See Listing.
Seller™s market A condition in which there are more buyers than
sellers; prices generally increase.
Selling agent See Buyer™s agent.
Settlement See Closing.
Severalty Vesting of title in which you hold title by yourself.
Sheriff™s deed Marshal™s deed; a deed used by courts in foreclosure or
in carrying out a judgment. This deed transfers a debtor™s title to a buyer.
Short sale A lender selling a property for less than the amount of the
Single agent An agent representing only one party in a real estate
Speci¬c performance Law that allows one party to sue another to
perform as speci¬ed under the terms of their contract.
Standard-coverage title insurance The regular investigation for this
insurance generally reveals only matters of record and location of the
improvements with respect to the lot line.
Straight note A promise to pay a loan in which the principal is paid
as one lump sum, although the interest may be paid in one lump sum or
in installments.
Subject-to loan An existing loan for which buyers take over
responsibility for the payments, and seller remains primarily liable in the
event of a de¬ciency judgment.
Take sheet A form used to collect information necessary to prepare
the escrow instructions.
Tax deed Controller™s deed; a deed used by a state to transfer title to
the buyers.

Taxes See Property taxes.
Tax stamps A method of denoting that a transfer tax has been paid in
which stamps are af¬xed to a deed before the deed may be recorded.
Termination of agency Ending of an agency agreement.
Time is of the essence A statement that one party in a contract must
perform certain acts within the stated period before the other party can
Title Evidence of one™s right to a property and the extent of that right.
Title insurance The policy issued to you by the title company on
completion of the ¬nal title search protecting against claims in the
future based on circumstances in the past.
Title insurance companies Companies issuing title insurance policies.
Title search An examination of information recorded on the seller™s
property at the county recorder™s of¬ce. This examination veri¬es that the
property has no outstanding claims or liens against it to adversely affect
the buyer or lender and that the seller can transfer clear legal title to the
Transfer fee See Assumption fee.
Transfer tax Documentary transfer tax; a tax that some states allow
individual counties or cities to place on the transferring of real property.
Trust deed A document, used as a security device for the loan on your
property, by which you transfer bare (naked) legal title with the power
of sale to a trustee. This transfer is in effect until you have totally paid off
the loan.
Trustee A person who holds bare legal title to a property without
being the actual owner of the property. The trustee has the power of
sale for the lender™s bene¬t.
Trustee™s deed A deed used by a trustee in a foreclosure handled
outside of court to transfer the debtor™s title to buyers.
Trust funds Funds held by a closing agent or escrow holder for the
bene¬t of the buyers or seller.
Truth in lending A federal law that requires disclosure of loan terms
to a borrower who is using his or her principal residence as security for
a loan.
Glossary 265

Unconditional lien release Waiver of liens; a release, usually signed
by a contractor, after a job is complete and you made the ¬nal payments
waiving and releasing all rights and claims against your home.
Unenforceable Not able to be enforced; void.
Unlawful detainer The unjusti¬able keeping of possession of real
property by someone who originally had the right to possession but no
longer has that right.
Usury Interest charged in excess of what state law permits.
VA Veterans Administration; the federal government agency that
manages VA loans.
VA loan GI loan; ¬nancing made by having a conventional loan made
by a lender guaranteed by the VA.
Vendee Purchaser or buyer.
Vendor Owner or seller.
Vesting Interest that cannot be revoked.
Veterans Administration See VA.
Void To have no effect; not enforceable by law.
Voidable Able to be set aside.
Waive Unilateral voluntary relinquishment of a right of which one is
Walk-through inspection Buyers™ physical examination of a
property within a few days before closing, verifying that systems,
appliances, and the house itself are in the agreed-on condition.
Warranties Printed or written documents guaranteeing the condition
of property or its components.
Warranty deed A deed in which the grantor explicitly guarantees the
title to be as indicated in the deed. The grantor agrees to protect buyers
against all claimants to the property.
Wrap-around mortgage See All-inclusive trust deed.
Zoning Governmental laws establishing building codes and
governing the speci¬c uses of land and buildings.
Main entries are boldfaced for your convenience.

Assigning, 167 Caveat emptor, 60
CD (certi¬cate of deposit), 31
Contracts, 168“170
Credit bid (opening bid), 35,
Foreclosure, 37, 164
60, 152
Leases, lease options, mortgage
CPA (certi¬ed public
contracts, trust deeds, 170
accountant), 4
Option contracts, 170, 179
Purchase contracts, 168“170
Equity, 96
Unassignable, 208“209
See also Option Contracts
Fannie Mae (Federal National
Fee, 168
Mortgage Association), 73,
How to, 171“172
When, 176“179
FDIC (Federal Deposit Insurance
After closing, 177, 178“179
Corporation), 119, 129“131
Before closing, 176,
FHA (Federal Housing
Administration), 23, 113“117
During closing, 177, 178
Flipping, 3
Why, 172“176
Avoids pitfalls, 176 Foreclosure paperwork, 17
Fastest way to ¬‚ip, 173“175 Process, 157“164
Make $ Strategy, 8“13
Quickest, 175“176 Find, ¬x, & ¬‚ip, 8, 11“13
Without buying, 172“173 Find & ¬‚ip, 8“10
See also Assigning
Brain trust, 71, 109 Flipping-¬rst attitude, 8


Foreclosure, 29
Useful strategy, 4, 8, 17
Bankruptcy, 82“84
Legal delay, 82
Options, 45, 80“85
How to, 41“49, 73“74, 192“195
Process, 17“26
At appointment with owner,
At the sale, 19, 35“36, 48“49,
44“48, 55, 78“85, 89“90
58“59, 144, 147, 149“153
Guidelines, 42
Loss recovery, 21“22
Know value, 91“95
Vesting, 22
Elements of value, 92“93
Types, 18“24
Forces in¬‚uencing value,
FHA insured mortgage,
22“23, 125“129
Six values, 91“92
Insured conventional
Target area, 94“95
mortgage, 21“22
Ways to value, 92
IRS tax liens, 131, 135“143
Preparation, 147“149, 150
Judicial auction, 142“144
REO, 199“209
Mail-in bid auction,
Set appointment with owner,
43“44, 71“72, 78
Public auction, 139“140
See also Process, At the sale;
Judicial (lawsuits in court),
Solutions; Stages
Reasons why, 30“38
Power of sale (nonjudical),
Buying wholesale real estate,
Second mortgage
Buying from wholesale
(junior), 24
sellers, 33“36
VA guaranteed mortgage, 23,
Less competition than retail,
Redemption, 80“81
Make quick cash, 37“38
Reinstatement, 80
Deed in lieu of, 26, 82, 116
Renegotiate with lender, 84“85,
Finding, 65“66
98, 101, 105“109, 115“116,
Advertise, 69“70
Key words/phrases, 66“69
Due-on-sale, 106“107
HUD (FHA & VA), 73, 109, 118
Prepayment penalty, 107“108
Fannie Mae, 73“74, 109
Solutions, 45“48
Freddie Mac, 129
Buy the equity, 45, 95“97
IRS, 144
Equity sharing, 46“47
Searching public records, 70“71
Equity sharing redux, 47
Foreclosure service, 71
Index 271

PMI (private mortgage
IRC 280A, 47
insurance), 21, 33
Reverse lease option, 47“48
PUD (planned unit
Stages, 49, 53, 61
development), 5
After foreclosure sale, 36,
59“61, 207“209


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