Distress occurs in many ways. Sometimes it is caused by purely financial situations. Other times a spouse gets fed up with real estate and wants to convert everything to cash. In yet others, by the fact that a property has been transferred by will to someone at too great a distance for them to manage it.
Sometimes distress is created by relocation caused by a career move, or because of illness. Other times, it is because people want to retire but don't have the money, or have management responsibilities for large portfolios of houses that they can only escape by selling at discount. At one time or another over half a century of building, buying, financing, leasing, etc. I have sold houses at deed discounts for all of the above reasons because I had no other alternative.
From the standpoint of someone who is willing to spend a little more money to save time, and who wants to avoid the competition that surrounds sellers who either advertise houses in For Sale By Owner advertisements or on signs; or whose houses are listed in legal notices. I've found that blind mailing has been worth the effort.
When you know of a foreclosure situation, personal contact prior to the foreclosure sale is the most effective buying technique. On the other hand, when you're just “fishing”, sending out letters and post cards by direct mail, and placing notices on appropriate internet sites still boils down to “fishing”, but with a net rather than a rod and reel.
On the average, sending out pre-printed post cards will cost about twenty five. cents per card. Sending out hand-addressed letters will cost about twice as much. You can see that it can be fairly expensive to send out 1000 letters a month unless they go to the right people. Rather than simply mailing letters to those who either advertise, or who are advertised, in the newspaper, it is much more productive to try to buy lists of names from the property records department in the courthouse.
Depending upon the degree of sophistication and cooperation that prevails, you can often buy lists of owners sorted by property zip code, marital status, owners' mailing address, and price range. Properties that are tied up in Bankruptcy and Probate Courts are good targets too. The names of these owners can often be obtained by searching these court records. Quite often, by paying a little more, you can buy a CD already to put into your mail-merge program that has been pre-sorted to your specifications. This is well worth the effort.
Some tax collectors maintain computer files that you can access that will give you the history of tax assessments on a particular property. For a fee, some property appraisal firms will give you historic price information for houses in particular areas. From this data, you can see whether or not the values have been manipulated upward by a lot of bogus transfers, or whether the owner paid fair retail market value when buying the property.
When you become a good customer to a title company, they will sometimes share their files with you so you can do your own preliminary title and lien searches to discover who owns what so that you can spend your money and time contacting the right people.
Over a Iong period of time, I have found that non-occupant owners, out of area owners, and single parent owners are the richest vein of ore in the distressed property mine. That doesn't necessarily mean that they are in financial distress; they may be distressed because of management, maintenance, and distance more than for lack of money. Nonetheless, they represent a potentially lucrative opportunity. Following is a letter that I used for a long time to get that first telephone call to come in.
Dear Sir and or Madam,
It has come to my attention that your personal situation is rapidly changing.
Often, in cases such as yours, a substantial amount of time and effort must be wasted in disposing of mortgage obligations and real estate.
I am interested in buying your property for cash or terms which we might arrange between us.
I am sure you will agree at this time, “cash” would be easier to dispose of, or to use to pay bills, than property.
If you feel I can be of further service, either to pursue some alternatives, or to find a way to help you convert your property to cash quickly and without a lot of complications, please call any-time. Sincerely,
My Name, Trustee
The Equity Security Foundation
The foregoing isn't the epitome of letters, nor is it as effective as a letter might be that addresses specific problems; but at least, it's a start for those who don't quite have a grasp of how a letter might be written to initiate a conversation. When you don't know what the owners' motivation is, a letter that can be read in a number of ways can smoke them out. Once you discover through patient questioning what the true basis for their desire to sell is, you can then try to devise an approach that might work best. That's where experience comes into play.
As you begin to differentiate your lists of potential sellers into groups, you will find that you'll get different responses to different letters, at different seasons in the year, and between different socio-economic and demographic groups. You'll also discover that people respond differently to letters, postcards, telephone calls, and door-to-door solicitations. It's up to you to match your approach to the market.
