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Mortgages & Creative Financing

Value Disputes and Bank of America Short Sales

If you have completed more than a handful of short sales, then you have likely have been involved in a value dispute with the short sale lender.  During the course of the short sale, the short sale lender sends out another Broker to complete a Broker Price Opinion (BPO) for the short sale listing. The bank then, in most cases, bases their price on the value stipulated in the BPO. However, often times, there is a discrepancy between the value stipulated in the BPO (what the bank wants) and the offer amount (what the buyer wants to pay). In many cases, what comes next is a valuation dispute. And, at some lending institutions, this is much easier to complete than at others. Bank of America has recently revised their process for addressing valuation disputes that arise during the short sale transaction. Here is an outline of the new process (courtesy of our friends at bankofamerica.com/realestateagent): Tell your short sale specialist that you would like a reconsideration of the value. Receive an investor-specific, easy-to-complete form from your short sale specialist that specifies all requirements for a successful value dispute. Fill out the form and attach specified evidence. Stay in touch with your short sale specialist for results. Expect a value dispute review within 10-12 business days once all required information has been received. Here is the evidence you will need in order to support your valuation dispute: Provide comparables that are recent, proximate (nearby) and similar to the property in question. “Recent” means sold within 90 days of the actual value document date. “Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate. You will be able to provide additional notes to highlight characteristics of the comps. When the dispute centers on property condition or hazards: Provide an itemized estimate from a licensed contractor on the contractor’s letterhead. Provide photos to illustrate the repair, condition issue or hazard you want to highlight. If your valuation dispute relates to condition and significant repairs are required (which would lower the subject property’s value), it’s best to have multiple bids in order to support your position. Based on my experience, I can tell you that you should not expect the bank to pay for items such as new carpet because there is a small stain on the living room floor. Big stuff, legitimate supporting documents, and a strong will to succeed could lead to success in a short sale valuation dispute. moneyblognewz Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

How to Address Closing Cost Credits in Short Sale Transactions

Agents, buyers and sellers are abuzz because it’s a seller’s market again. Just a few weeks ago an agent friend of mine received 24 offers on his short sale listing, and another property in my area got 10 offers the very same weekend. When reviewing short sale offers with clients, it is important to look at the type of loan that the buyer will obtain: VA, FHA, or conventional financing. And, will the buyer require a closing cost concession from the seller? One of the unknown factors often associated with a short sale is whether the bank will approve the closing cost concession. For example, you may have an offer from a buyer that needs a 3% closing cost credit. However, it is entirely within the realm of probability for some short sale lenders to have guidelines that would prohibit them from approving that 3% closing cost credit. Then what do you do?  A short sale seller is not going to net any money at closing and will not pay that closing cost credit out of his/her own pocket. But, there are two easy and obvious solutions: Suggest that the seller select an offer that does not ask for a closing cost credit. Write a counter offer whereby you specify that approval of the short sale closing costs by the short sale lender is not a contingency of sale. If you opt for the second option, then the buyer agrees to move forward if the bank does not approve the closing costs. Of course, there is always a way for a buyer to walk away from the deal with his/her head held high. However, this method could help make the short sale transaction a little more airtight. Photo: ericlbc Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

Updates to the HAFA Program

The Home Affordable Foreclosure Alternatives Program (HAFA) is a government-sponsored program aimed to provide additional alternatives to foreclosure. Aside from loan modification (the government’s HAMP program) and underwater refinance (the government’s HARP program), the Treasury has also provided options for distressed borrowers through short sale and deed-in-lieu of foreclosure. This program is a little bit tricky, and you really need to understand the ins and outs when speaking with mortgage servicers about a HAFA short sale. I received a call the other day from an agent that was having trouble with his short sale processing, particularly with the second lien holder. Apparently, the second lien holder said that he would agree to the short sale if (and only if) he received the $8500 allowed through the Treasury’s HAFA Program. Apparently, this negotiator was a little overzealous and under-informed. It’s true that the Treasury has made some changes to the Program guidelines; however, changes are not required to be put into play by the mortgage servicers/participants until June 1, 2012. (And, the thing about the $8500 is not quite as it seems.) Check out or download this handy chart in order to learn more about how HAFA is going to be changing in a few short weeks (and also check out the line about the $8500).   View this document on Scribd Photo: James Bowe Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

Short Sales – How to Manage the BPO

I’m not going to say that I am super strong. I’ve done some martial arts and some kickboxing, but if I hit you, I probably wouldn’t take you to the floor. Nevertheless, I know the best way to fight a bad Broker Price Opinion (BPO). I can knock that baby to the floor in three easy moves. And… here they are: Meet the BPO agent at the property. In order to be able to intelligently discuss the BPO with the seller’s lien holder, it is a good idea to assure that it has been completed, and that it was completed by a licensed agent. If you go to the property at the time of the appointment, you can verify that someone actually showed and that the individual who showed was not merely an assistant sent to take photos of the subject property. Prepare you own Comparative Market Analysis. Using your MLS, find at least 3 comparable properties that closed within the last three months. These properties need to support your purchase price. If they do not, you need to have ancillary materials that might explain the disparity in value (e.g., photos, repair bids). Order a property appraisal. When all else fails, you can always submit a full appraisal to the bank. Since the appraiser is certified, the short sale lender generally puts a lot of credence in the values noted on a full appraisal. Yes, appraisals cost money, and someone will have to pay for the appraisal, but often times, this is the best way to provide an accurate value to the short sale lender. When the short sale lender counters your offer because the BPO came in higher, explore your options. If you feel strongly that the bank’s value is incorrect, you can knock that BPO to the floor with the three easy moves described above. Photo: Todd Huffman Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Improved Short Sale Processing Time – Fact or Fiction?

If you are considering the purchase of a short sale or if you are an listing short sales, 2012 may be the year for you. First off, the Mortgage Forgiveness Debt Relief Act of 2007, which protects certain short sale sellers from tax liability, is set to expire at the end of the year. The Treasury has amended the HAFA guidelines for those short sale sellers interested in participating in the government’s HAFA short sale program. Bank of America also alleges that they are now moving along swimmingly. And now, this past week, the Federal Housing Finance Agency announced that both Fannie Mae and Freddie Mac will adopt new policies to streamline short sales starting in June. Beginning in June, mortgage servicers must review and respond to requests for short sales within 30 days, according to the announcement. Servicers will also be required to provide weekly status updates if the short sale is under review for more than 30 days, and servicers will need to make their final decisions within 60 days of receiving an offer. According to FHFA Acting Director Edward J. DeMarco, “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.” What will this mean for buyers of short sales? This may mean improved processing times, and quicker closings. But, this also may mean quicker short sale rejections if those individuals processing the short sales do not provide Fannie and Freddie with the information necessary within the specific time frame. What will this mean for agents processing short sales? While the aim of this announcement is to complete the short sale processing more quickly, this latest announcement might actually mean that short sale decline (or rejection) letters will be fast and furious. The servicers continually require updated bank statements, pay stubs and tax returns. Those that cannot provide the information quickly and efficiently may receive their rejection with in the 30-day period in order to meet the new servicer guidelines. There is no doubt that short sale processing has significantly improved since 2007 when lenders would not even share employee email addresses and short sale packages could be faxed multiple times without ever being received. With all of the different short sale programs underway, things have definitely improved for short sale sellers as well. Summer is generally a fun time, and it will be lots of fun for short sale processors across the nation if this new announcement makes short sales get approved more quickly and efficiently. Photo: Klearchos Kapoutsis Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

Short Sale Changes at Bank of America

We all know that Friday the 13th is considered to be bad luck according to western superstition. Yet, ironically, on Friday, April 13, Bank of America made a few major changes that may make our short sale processing times more efficient.  The goal of these changes is to make short sale processing through Equator (the Internet-based platform) at Bank of America so efficient that short sale approval can be received in less than one month. First off, Bank of America will require their new third party authorization for all short sales being processed through the Equator system. Additionally, the folks at Bank of America will be working to improve task flow for short sales in Equator by making some minor changes to the process. According to the Bank of America website, Starting April 14, you’ll see several changes: Five documents (which you can obtain at www.bankofamerica.com/realestateagent) will be required for short sales initiated with an offer: Purchase Contract including Buyer’s Acknowledgment and Disclosure HUD-1 IRS Form 4506-T Bank of America Short Sale Addendum Bank of America Third-Party Authorization Form And, effective April 14, you will have only 5 days to submit a backup offer if your buyer has flown the coop. The last change is a curious one, especially for short sale listing agents, since it often takes awhile to find a new buyer after you learn that the current buyer has changed his or her mind. Nevertheless, lucky or unlucky, be prepared for changes to Bank of America processing that became effective on Friday, April 13. (photo credit) Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

A Short Sale Is Like a Game of Clue

Remember when it was Professor Plum in the library with the lead pipe? Well, solving the mystery in a game of Clue would be a much smoother and more efficient death than what you might see in the wacky world of short sales. If a short sale were like a game of Clue (by Hasbro), instead of a lead pipe you could be wiped out by an abstract of judgment, an HOA lien, or even an IRS tax lien. Weapons such as these will get in the way of closing the short sale transaction. The principal way to avoid being killed by one of these weapons is to order a Statement of Information (SI).  Have the short sale seller complete a statement of information at the beginning of the short sale process, and have the title company run that statement as soon as possible. Certain liens “stick” to the seller and not to the property. Nevertheless, these same liens do need to be cleared (paid off or released) at or before closing. And, by the way, not all short sale lien holders are willing to give up their proceeds in order to liquidate these debts. Abstract of Judgment  If the seller has an abstract of judgment filed against him (or her), suggest that the seller negotiate for this to be released or settled in order to be able to successfully close the short sale. HOA Liens There’s already been much ado about HOAs as short sale deal killers. In certain parts of California, HOAs are actually foreclosing on the properties and renting them out in the interim. Talk about a deal killer… Work with the HOA to settle the debt at closing. IRS Tax Liens  It takes several weeks to separate an IRS tax lien from a property being sold in short sale. Wouldn’t you like the short sale seller to begin working on this early in the short sale process and not after you have short sale approval and are ready to close? Ordering that statement early and having a good heart-to-heart with your client can go a long way towards a successful short sale closing. Trust me… you do not want Professor Plum anywhere near your next short sale listing. (photo credit) Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Mortgages & Creative Financing

Distressed Borrower Programs – Will They Work?

There seem to be more and more programs each and every day that are coming out of the woodwork to help distressed borrowers save their homes from foreclosure. Here are two of them that looked pretty interesting at first glance, but if you read between the lines, you may find something entirely different: Bank of America Offers Principal Reductions Up to $100,000 According to the Los Angeles Times, these principal reductions will be made on loans that were originated by Countrywide Financial and packaged into securities. Bank of America acquired Countrywide in 2008, along with their good and bad assets. According to Reuters, qualified borrowers are expected to receive principal reductions averaging over $100,000. Those receiving the reductions will be over sixty days late on their payments and they may see their mortgage balance cut to their home’s current market value. However, this program only for specific eligible loans—not Fannie Mae and Freddie Mac, and remember that you must be 60 days delinquent as of January 31, 2012. Bank of America Offers a Rentback Program Most distressed borrowers love their homes and want to stay in them forever. If you or someone you know glanced at this article in the newspaper or heard about this program in the news, it may have piqued their interest. However, this program is only for a total of 1000 homeowners, located in Arizona, New York and Nevada. And, if you qualify, Bank of America will be reaching out to you directly to offer you the opportunity. While both of these programs sound great on the surface, it is important to read about them in their entirety. And, with Easter just around the corner, it is important not to put all of your eggs in one basket. mistaric Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Business Management

Contract Failures and Cancellation Rates

I got a call this week from a newspaper columnist who wanted to get my opinion on some of the latest data noted by the National Association of Realtors®. You see, it’s some pretty interesting stuff. Check this out: Fifty-one percent of NAR members report that contracts settled on time in February, 18 percent had delays and 31 percent experienced contract failures; the cancellation rate was 33 percent in January and 9 percent in February 2011. Contract failures are commonly caused by declined mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price. I can pretty much corroborate this data with my personal experiences helping agents throughout California with the processing of their short sales. My staff is pretty busy, and we often see trends in the market. And, this is one of the trends that we saw. Contracts are failing at a high rate. Here’s why: Appraisals: Appraisals often come in lower than the previously negotiated price. Sellers do not want to renegotiate, or short sale agents have trouble challenging the bank’s short sale approval with their home appraisal. Homeowner’s Association Troubles: In these tough times, the Homeowner’s Associations are facing challenges. Delinquency rates impact their financial stability, and this (in turn) impacts the lender’s ability to make a loan. Mortgage Applications Are Declined: It’s often surprising to hear that someone who was previously qualified to purchase a home is suddenly declined. That’s why it is so important to work with a lender who really knows his (or her) stuff. Lender guidelines are changing all the time. And, it’s possible that someone who qualified two months ago may not be qualified any longer due to a change in those guidelines. The good news is that, according to the article, “All-cash sales rose to 33 percent of transactions in February from 31 percent in January; they were 33 percent in February 2011.” I’ve been known to say that it is the equity buyer that is going to help stabilize the market. And, it appears that the upward change in February may actually be a step in the right direction. (photo credit) Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Business Management

Short Sales and Buyer Deposits – It’s a Pickle

I received a call earlier this week from a buyer’s agent whose buyer was purchasing a short sale. This agent was not a happy camper. His buyer had signed a short sale addendum and agreed to deposit the earnest money into escrow, yet somehow the agent had overlooked that little ditty. Now the buyer did not want to put the earnest money into escrow. “This is a short sale,” he stated,  “and it could take a few months to obtain short sale approval.” Additionally the buyer’s agent seemed to feel that placing that earnest money into escrow might be some sort of legal breach. While I am not an attorney (and I don’t play one on tv), the California Association of Realtors®’ contracts actually have a specific line item where you can stipulate whether the earnest money is delivered to escrow immediately or upon receipt of the short sale approval letter. (So, that kind of leads me to believe that there is no legal breach.) Many buyers want to continue shopping, and would prefer not to deposit their money into escrow until the lender(s) approve the short sale transaction. You never know when a better deal is gonna come your way, and you may not want to be tied down by putting that money into escrow. Also, you cannot be entirely certain that the short sale lender will approve your offer, so why waste time depositing those funds? The thing is that it may be a good idea to deposit those funds into escrow. Doing so further cements the buyer’s position as first in line for purchase. Also, it sets a tone for a serious transaction. If the seller is close to foreclosure and wants to avoid that, the seller wants to know that the buyer is really going to close: thus assuring that foreclosure is avoided. Also, the short sale processor (the agent) is now going to dedicate hours and hours to the deal. And, why bother if the buyer is just going to walk away when short sale approval is received? It’s a tough call as to whether to deposit those funds into escrow or not. But, if a buyer is serious and really wants the property, it seems that putting that money into escrow may not be a bad way to go. uggboy Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Business Management

Buying an Equator Short Sale

If you hear the word ‘equator’ associated with a short sale, this does not mean that the property in question is located somewhere near the middle of the globe. It simply means that the short sale transaction (perhaps the property that you are listing, buying or selling) is being processed through an online (Internet-based) platform called Equator. As of the time of this writing, the online platform, Equator, is used by Bank of America, Wells Fargo, Nationstar, GMAC, and Service One. While each of these servicing companies uses the system differently, the bottom line is that the system helps aid in the communication between all of the parties to the short sale transaction. The benefits of this system are that documents are uploaded instead of faxed, and messages are sent electronically instead of calling a toll-free number. One of the unique attributes of Bank of America’s short sale processing via Equator is the request for the first five digits of the buyer’s social security number as well as other personal information about the buyer. When Bank of America added this tier to their short sale triage a few years back, one of the veeps advised me that this new step would help to assure that any transactions entering their system were not fraudulent in nature. And, believe it or not, Bank of America actually does verify the info you provide. If you are buying or processing a Bank of America short sale through Equator, be prepared to provide this personal information along with your offer. If the buyer is unwilling to provide that information, Bank of America is generally unwilling to move forward—it doesn’t matter whether your offer is all cash and hundreds of thousands over asking price. Rules are rules, so be prepared to play by ‘em when it comes to B of A and the Equator system. Photo: Flickr: miczanin Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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Real Estate News & Commentary

Buffett and Trump Say Buy Real Estate Now

Did you hear the news? Warren Buffett says that now is a great time to buy. That’s true. With interest rates and prices also at all time lows, why not make purchasing a property a priority in 2012? But, is it a good time for investor buyers? Yes and no. For investor buyers who want to hold onto properties for rental purposes, now is an awesome time to purchase a property. There are a fair amount of properties available, and investors who are paying cash have an additional edge—particularly on properties where condition may be a factor that impacts a buyer’s prospects for obtaining a mortgage loan. But, on the other hand, those investors interested in ‘flipping’ properties may not have it quite as easy. In San Diego County, we rarely see properties (particularly bank-owned ones) selling for cents on the dollar. Those pesky banks seem to prefer to take their chances with FHA first-time homebuyers (and move up buyers) that are making higher offers as opposed to recognizing the benefits of cash in pocket right here, right now. What’s an investor to do? For those investors looking for a steal (or a deal), the best option seems to be identifying homes that will not qualify for any sort of loan programs. This will decrease the buyer pool significantly and may allow the buyer to get that deal that he is looking for. Buying a property cheap ain’t easy. You have to write a lot of offers, in many cases, before you are able to put together a worthwhile deal. But, with prices expected to stay low for some time, it seems that investors will definitely have the opportunity to get the deal they are looking for. Photo: pasukaru76 Free eBook from BiggerPockets! Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today! Click Here to Download the eBook Now! We hate spam just as much as you

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