The foreclosure process has three phases, and there are several opportunities to acquire properties in all of them. First, you have the pre-foreclosure phase. This is everything up to the actual sale of the property to the highest bidder. Then, the foreclosure sale follows. Finally there is post-foreclosure, when the lender takes ownership of the property.
Many investors feel that the most promising opportunities to score amazing bargains exist in the pre-foreclosure period. This happens because investors can deal directly with the owner, allowing you to have more control over your investment deals. You can grab the opportunity as the majority of these sellers are motivated to sell since they are losing their houses and damaging their credit. Plus, you do not need a lot of cash to purchase houses in the pre-foreclosure phase. It’s typical for investors to use loans to acquire these properties, especially in order to make repairs.
Locating Foreclosures Before They Hit The Auction
The first step in locating foreclosures prior to the sale is to look for owners who have recently fallen behind on their obligations. When a homeowner misses three or more payments, the lender may file for foreclosure. Once filed, which is generally 3 to 6 months after the first missed payment, it becomes a public document and is simple to locate. You may acquire these foreclosure lists for free or get them straight from the county’s websites on many occasions. Because it is so simple to obtain, everyone looking for foreclosures will be able to obtain it. I’ve visited sellers in their houses and seen heaps of investors’ letters and postcards scattered around the kitchen table, piled up on the counter. That collection of marketing pieces is your competition, and it may be intimidating.
Indeed, the best way to approach these deals is to find the seller BEFORE it becomes public knowledge. That, however, is a problem because it is not simple. The best technique to achieve this is to establish a strategy and stick to it. You’ll want to employ some marketing to reach out to homeowners who may be in financial difficulty and inform them that you can assist them. You’ll want to set your budget, measure the outcomes, and refine your campaign to be effective in maximizing results at any time you begin a marketing effort. I’ve always had excellent results with direct mail in the pre-foreclosure stage.
Ways To Promote Your Offer To Pre-foreclosure Homeowners
Here are some suggestions for improving your chances of success:
- Send each seller at least five letters or postcards. Seven or eight is even better!
- Send them at least once a week.
- Focus your message on assisting them financially by purchasing the home. Use acceptable phrases such as “Stop foreclosure” or “save your credit” as these statements would appeal to someone looking for assistance.
- Proposing a risk-free offer like presenting a free consultation, report, or video on how to handle their problem might be tempting.
- Don’t forget to end it with an enticing call to action. Tell them what you want them to do and how they can do it.
There are several methods for obtaining mailing lists. There are foreclosure lists that you can buy or perhaps secure for free. It’ll be a long and laborious list, so you’ll need to figure out how to stand out, but it’s an easy list to acquire. In addition, several sources can provide foreclosure listings before anyone else knows about them. You can browse through recent loan interest rate changes, code violations, tenant evictions, divorces, defaulted property taxes, and sometimes you may get current payment default lists.
There are a few alternatives to direct mail campaigns. I’ve discovered some great bargains in pre-foreclosure through putting up yard signs or roadside billboards. Some investors dislike these indicators because they don’t appear attractive, and many towns negatively perceive them as trash and may impose fines. That is why they are known in the business as bandit signs. But they worked well for me, so I kept using them for years. They work because seeing it might motivate someone who is about to lose their home to reach out for assistance before the news becomes public. You might phrase your message to foreclosure leads like, “We Buy Houses” or “Stop Foreclosure,” with your phone number or some variance of this. If you don’t want to put up notices, you could always hang them on a Friday and remove them on a Sunday.
Some of the most successful investors also try to distinguish themselves by physically knocking on doors. The goal of a marketing campaign is to get an invitation into the home so you can make an offer. What could be more pleasant than to have a firm handshake on their front porch?
Scheduling Meetings With Pre-foreclosure Sellers
Once you begin receiving phone calls from your marketing efforts, you’ll want to schedule appointments with the sellers to check out their houses and discuss their choices. Obviously, you want to assist them as much as possible by purchasing their property. In most situations, it is the best alternative for them. Leave some contracts in your car, but be prepared to dash out and obtain one if you can agree on price and terms at this initial meeting.
What You Should Know: Foreclosure Protection Act
There may be more hoops for you to jump through before you can finalize a foreclosure like this. In Colorado there is the Foreclosure Protection Act, which specifies specific language and disclosures that must be included in your agreement. It should also cover the cooling-off period for the seller to consider the transaction before completely committing. I would strongly advise you to hire an attorney for an hour or two of their time to ensure that you are staying in compliance with your contract and purchasing process. If you’re more comfortable with a real estate professional, you may always rely on one.
What You Should Do: Due Diligence
Once you’ve completed the contract, you may begin your due diligence. Verifying the fixed-up value, rental rates if you intend to keep it, setting up a repair budget, and property inspections are some tasks that might be completed during this period. At a minimum, I strongly advise that you have the sewer cleaned. This is one thing that cannot be seen and might be very costly to repair. Once you’re ready, you’ll want to proceed, open escrow with a title company or an attorney, then contact your lender.
When In Need Of Assistance, Consult Your Loan Lender
With all this in mind, you should be approved for the loan before investing time in your marketing, meeting with sellers, and doing your diligence. Pine Financial does not charge any fees and provides free pre-qualifications. To get started, visit Pine Financial Group.
