RESIDENTIAL BACKFLIP FROM PETER CONTI

[Real Estate Seller]

For everyone that don't buy the book there are 4 that will.

[The Loan Ranger]

Ok....the back flip thing seem like a good idea but what would a bank take a discount on a loan that is performing as it should.....I don't do feel that question got answered in the webinar.....and if I am to shell out a $1000.00 well I am going to need more information on that point.......Also don't you just hate it when these guru's say ....If you're serious.....we are look for serious people.....we don't want your is you not serious.  Why don't you just say it.....We want you money..   Yeah I got a grand....but I will be damned if I going give it up to you because you made me feel like less that nothing..

[TKtheRealtor]

Ok....the back flip thing seem like a good idea but what would a bank take a discount on a loan that is performing as it should.....I don't do feel that question got answered in the webinar.....and if I am to shell out a $1000.00 well I am going to need more information on that point.......Also don't you just hate it when these guru's say ....If you're serious.....we are look for serious people.....we don't want your is you not serious.  Why don't you just say it.....We want you money..   Yeah I got a grand....but I will be damned if I going give it up to you because you made me feel like less that nothing..

Hi Loan Ranger, I thought about that question to..but I think banks are willing to sell at a discount if you are giving them a lump sum of cash up front...cash is King..I think this is the reason why this program is most effective with higher end homes, more room for win-win-win negotiations...just my theory lol, no expert on this

[Dave T]

As I understand the technique, you find a homeowner with a high end house who is upside down on a jumbo loan ($550K and up).  You buy the loan from the lender at a significant discount, then offer the homeowner a lump sum payoff for less than the principal balance on the note but for more than the discounted price you paid for the note.

Your profit is the difference between the homeowner's discounted payoff and your lower discounted purchase price for the loan.  The homeowner gets to keep his home and get out of an underwater situation for less than he owes on his loan.  The bank gets out of an upside down jumbo loan that could go into (strategic) default at any time.  Win-Win-Win.

Sounds like something John Behle probably covered in his "Paper Game" course 20+ years ago.

[arbitarbit]

Couple things to know. The property must be in default. Basically you will buy the property from the lender for much less than the value because it is in default. You then sell the property back to the owner at a lower rate price than they owed, but enough for you to make money. However you must make payments on your loan for 6 months, before you can exit and leave original owners their property. Also this all all has to be agreed to by the lenders. Beware!

altered due to rules violation

[Dave T]

arbitarbit,

According to Conti's webinar on the backflip system, you only target high end homes where the homeowner is underwater, but, current on the loan.  I don't see why you would need to make six monthly loan payments, if you can flip the loan you purchased back (backflip?) to the homeowner within 30 days.

[rosannas]

I listened to the Webinar last night my question was about flipping back to the original home owner isn’t there a rule/law that will not allow you to flip back to them if it’s a   defaulted note? Maybe it depends on which state you are in.
I think Peter Conti gets around this by only buying the notes that are not in defaulted.
 

[x_kamikazez_x]

I am on the webinar tonight. I would like to know if anyone get this course and how it turn out.

as Peter mentioned . this will qualify to do backflip

1.Jumbo Loan with $550k and up
2. Owner want to keep the house and are able to refinance
3. Loan not in Default.
4. Bank OK to selling the Notes.

I would like to know if anyone use this course. thanks

[ryanpal]

Couple things to know. The property must be in default. Basically you will buy the property from the lender for much less than the value because it is in default. You then sell the property back to the owner at a lower rate price than they owed, but enough for you to make money. However you must make payments on your loan for 6 months, before you can exit and leave original owners their property. Also this all all has to be agreed to by the lenders. Beware!

altered due to rules violation

This is incorrect.  The webinar states the buyers are not in default for this to work. 

On a separate note, I think this is a great strategy, however, I'd like to meet those actively doing this strategy.  Unfortunately everyone I have met "was just getting started" and hasn't done any yet.

[ras100]

I'll try to lay out the basics from that webinar here (this is what Peter Conti and Jerry Norton were saying):

Characteristics of house/loan that are good candidates for a back flip:
-It must be a high end home with a loan of $417,000 or greater (these jumbo loans are less likely to have been packaged and sold in a security, which makes them much easier to deal with and profits are larger).
-Owners must owe more than the house is worth.
-Owners want to keep the property.
-Owners don't want to hurt their credit (short sale, foreclosure, etc. are other options for them but will destroy their credit).
-Owners must be current on the loan's payments.

4 Steps to completing a back flip:
1. Establish the current value of the house-make sure loan is greater than value.
2. Determine the Price to Buy the Note- Take 80% of the current value of the home (the owners will be able to refinance at 80% LTV to pay you off once you buy the note). Subtract the amount of your profit (10-15% of the current value). This will give you the highest price at which you can buy the note.
3. Exit Plan, Owner Approved-Get the owner pre-approved for the refi at 80% LTV.
4. Buy note, close on refi-They said you could do this in 7 to 10 days, but i'm not sure why you couldn't set up a simultaneous closing.

Here is an example they gave (they said it was from a real deal):
$1.2 million loan
Value of $1.05 million
$800k refinance amount
$700k Note buy price
$100k profit

I am interested in doing deals like this because their are a lot of high end homes that are underwater in my area (San Diego). Here are my questions:
Has anyone ever done anything like this?
Are simultaneous closings on this type of deal possible? This would limit your risk of the buyer walking after you have bought the note. Are there other ways you can think of to limit this risk?
I think the best way to find owners that are underwater is advertising (craigslist, bandit signs, etc.), does anyone have other ideas?
Can anyone recommend any hard money lenders or transactional funding lenders that might be willing to do this type of deal?

I do not want to pay for the program ($1000), I really want to learn how to do this on my own, so I really appreciate any help or advice anyone can give. The program will give you access to lenders and tell you how to do it all, but they will only give you $10k per deal out of the profits, so I'd rather get the whole profit. Thanks for your help and ideas!

[AlexBailey]

Would the success of this program be highly dependent on who the lender is? Not all lenders are created equal of course. Additionally, junior lien holders would have to be written down as well. I have invested in luxury short sales since 2008. If this could be done it would be good to know who are the best lenders to target.

[kelle711]

Hello, I have also recently learned about the residential backflip strategy. I did not hear the webinar, but I did see where the program costs $1000 which I don't have.

I would also like to learn more about this strategy. I send out yellow letters to absentee owners, and get calls from people with underwater houses that are current on the loan all the time. What I am not sure about is how to approach the bank about buying the mortgage note. Do I just call them up and make an offer? Do I have to find the investor that actually owns the note? Also, what are the things to look out for when buying a mortgage note?

I am also wondering if this strategy can also be used for potential short sales i.e. instead of negotiating a short sale with the bank, negotiate to purchase the mortgage note at a discount, and then do a Cash for Keys with the homeowner to take ownership of the house, which you could then sell to a rehabber, or rehab and resell yourself. Any thoughts?

[ras100]

Good point AlexBailey. It seems like all of us just have questions and not many people have answers so far. If I get an answer to your question, I will post it. I know Bank of America and a couple others are putting clauses into their contracts that you can't sell REOs you buy from them for 90-120 days in some regions, so I am guessing they would be tougher to negotiate with but I'm not sure. Actually, searching google for "buying mortgage notes from banks" turned up some people that said they were buying at a discount from BofA, so maybe it is just trial and error.

Kelle711, most of the webinar was a sales pitch, so you didn't miss much and I put the basics that they gave in my first post. I think you would need to screen homeowners first to make sure that they are a good candidate and find out more about their home and mortgage. You need to know who currently owns the note (many banks sell them soon after creating them, so find out who the homeowner is making payments to), how much is still owed, interest rate, payments, if the homeowner is current, if their are other notes or liens, etc. I think you would contact the owner of the note directly, but I am not sure as I can't seem to find anyone who actually does this.

I think that it is actually better than a short sale for the homeowner if they do not want to stay in the property because it won't hurt their credit. But, they have to be current on their payments (which usually isn't the case with short sales). I guess with the strategy you're thinking about, they wouldn't have to refi, they would just give you the keys instead. The risk is that they change their minds and want to stay, then you will have to foreclose. That is why I would like to do it using a simultaneous closing if possible. It does sound like a good idea to me though. Anyone else?

[kelle711]

I have been thinking about the example where the bank sells the $1.2m note on a house worth $1m for $700k. If I were the bank, I would take that deal too. If the homeowner walked away, the bank would bear the cost of foreclosing, and carrying costs of the house while they tried to sell it. Think of what the tax bill would be like alone and it takes months to sell a $1m home. So targeting high-end houses makes sense.

ras100, you are right. I would have to have screened the homeowner and the property, and verified that my exit strategy is viable be it to wholsale, rehab and resell or rehab and rent. It is possible that the homeowner may change their mind but which would they prefer: foreclosure and no house and no money, or no foreclosure, no house but some money?

I for one am ready to take some action. I am going to look for someone at my REI club with experience in buying notes from the bank, and someone with lots of cash to team up with. I can find the homeowners and negotiate the cash for keys, the other guy can negotiate with the bank to buy the note, and the money guy will fund it all. Wish me luck.

[ras100]

Kelle711 that is awesome! Please let me know how it is going once you get started. Maybe we can bounce ideas off each other and warn each other about things to watch out for. Good luck!