“Pre-foreclosure” is one of those buzz words that get passed around in real estate investor clubs as something loaded with profit potential that offers a sure, easy, fast path to wealth and riches.
No doubt there are profits to be gleaned from contacting people who are faced with foreclosure and who will surrender all or part of their equity in return for debt relief, payment relief, or shelter; but there’s many a slip betwixt cup and lip.
First of all, making money with pre-foreclosures is not easy or particularly fast. There’s lots of competition. Amazingly, many would-be pre-foreclosure moguls depend upon lists of pending foreclosures prepared by commercial companies, or posted on the Internet. It never occurs to them that, if it’s that easy for them to get the names of people confronting foreclosure, it’s just as easy for all the other people attempting to buy pre-foreclosure property.
Unless they’re very lucky, they’ll always come up a day late and a dollar short behind someone just a little bit more prepared than they are.
When we get through all the trade jargon about pre-foreclosures, it boils down to contacting poor unfortunates who have missed some payments and getting them to deed the property over in return for a promise of protecting their credit rating or enough cash to start over again in another house; possibly a rental.
Many times homeowners are in complete denial, and steadfastly refuses to listen to any reasonable solutions to their problem. When they do listen, because so many people are bombarding them with phone calls, letters, and home visits, they get an exalted view of their property value and their bargaining position.
Quite often, all this does is to drive off buyers and the foreclosure goes forward as scheduled.
If you want to be successful dealing with pre-foreclosures, you’ve got to develop a method for finding people, who can’t make their payments, as soon after they begin missing them as possible.
I’ve made it a practice to cultivate those hired by lenders to collect delinquent payments. I can save them a lot of trouble if I can make a deal with the delinquent payer and bring payments current without a lot of furor.
One inventive fellow got a job with a loan servicing lender pursuing delinquent payers. This gave him an opportunity to contact them to buy their property prior to a large sum being required to bring payments current.
I’m a true believer in prospecting for opportunity. To that end, I carry pre-printed notices which offer non-qualifying homeowner loans on one side and offers to buy houses in any condition, occupied or not, on the other side. They don’t say anything about buying distressed property. I routinely stick these on houses that are run down, or burnt down, or that I think I can make a profit with. Moreover, anytime I discover that a person can’t make payments, I stick one of these in the door and wait for a phone call. This sets a positive tone with the homeowner who might otherwise be on the defensive about not being able to make payments and elect not to respond.
I’ll explore this subject further in upcoming blog posts
To learn more about buying foreclosures, see www.CashFlowDepot.com
