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Why and How To Buy
Judgment-Proofed Real Estate
   by Ray Como   

  (a case study for the lion hearted)

 We finally completed the paperwork on a really unusual deal. Here's a quick summary: A 22 year old kid called. He was raised by his grandmother. His mother (who he hardly knew) had died intestate (without a will) in September. The mortgage payment stopped when the mother died. They never probated her estate. Here is an FHA first mortgage of $12,300. The interest rate is 7%. There is a second mortgage of $8,000 with the Urban Redevelopment Authority (URA). Half of the URA balance is a 0% interest grant (which, I guess never gets paid.) The other half is a 0% loan where the payments are $38 a month. Then there is a $5,000 welfare lien. The county records show a market value of $17,800. Those three liens total up to $25,300. When the kid called me, the whole deal was in default. The mailbox was filling with foreclosure notices. The house was vacant. The utility bills where mounting. It was winter. Can't you j ust feel the distress?

 Needless to say, I own this kind deal. Nobody does it better. Distress, confusion and fear have all become my allies. Nobody (but me) would touch this deal with a ten foot pole. There was no money to pay a minimum real estate commission of $3,500. The owner was dead. The only heir didn't know or care what to do. I offered $500 to take the whole deal off his hands.

 Then I created something called "Grant of Letters of Administration" which gave the son the legal right to "administer" the estate of his mother, and thus, to execute this deed. (For your information, the "Administrator" is the executor of an estate with no will.) I filled out the inheritance tax return. I filled out something called a "Final Account" and lastly something called the "Inventory." In short, I probated the estate. Some might say I'm practicing law without a license. I think differently and I'm willing to argue the issue. I'm a principal. I'm a principal in every sense of the word. Quite literally, I did this paperwork for me!

 The payments on the FHA first, including principal, interest, taxes and insurance (PITI) are only $167 a month. The payments on that URA second are only $38 a month and remember, it's all at 0% interest. Finally, there's the welfare lien. Get this: When you get on welfare in our state, and you own real estate, on the first day, welfare slaps on a lien of $5,000. They revive the lien every 5 years but they don't try to collect and they don't charge interest. Isn't this a hot, new way to get a 0% interest loan with no payments...ever?

 Here's the fun news: The payments on that URA loan are only $38 and the welfare lien will just sit there for 10, 15, 20, maybe thirty years! The actual purchase price (translation: the present value of all those liens, loans and grants) is under $18,000. The house will sell on terms for $38,300 ten times a week. The house will generate $300 a month positive cash flow from the first day...and virtually forever. There is no risk for us because we didn't promise to do anything with anybody in this scenario. The house is already judgment-proofed because...who would know what to do with all this confusion anyway?

 Clearly, all proves my Real Estate wizardry, but when you add this uncanny ability to craft deals; to understanding and manipulating title law better than any lawyer you ever heard of…you will see then, that my willingness to take on these unique challenges, is also what secures my niche in these changing times...and I love it! It's exactly what I work for.

 The bad news is...after all this work, the kid stood me up three times. He just didn't show up...three times! The deal died right in my arms. Was I mad? Sure, a little, but I shrugged then I asked myself the omnipotent question: "What did I learn?" and it all sort of made sense again.

© MMI By Ray Como. All Rights Reserved

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Ray Como has created, produced, copyrighted and self-published 15 audio cassette programs and lots of other forms and tools for business, real estate, corporations, selling, marketing, finance, management and Entrepreneurship.
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