Making a profit from homes in pre-foreclosure is not simply about looking for pre foreclosure properties and just buying them up. It is necessary to to know the methods and strategies you can utilize to make certain you get a return on your investment. Should you not be cautious enough, you could come across some obstacles that could lessen your profits, or even make them disappear completely.
Here are some guidelines to get you started in pre-foreclosures:
Find a pre-foreclosure.
Start by finding a home in the default phase of the foreclosure process, where the foreclosure sale itself hasn't taken place yet. These are difficult to find because you simply can't tell since there is no posted sign announcing that. So nowadays that's when the Internet becomes your best friend. There is a system which somehow gathers all of this information for any state. For those of you that are serious about pre-foreclosure homes, you can begin to receive up-to-date preforeclosure leads within minutes from finishing reading this article.
Seek motivated sellers.
When buying real estate, one of the fundamental principles is to find motivated sellers. There is no group of sellers more motivated than those in pre foreclosure. These type of sellers are typically eager, if not desperate, to find a fast way out of their less than pleasant financial situation. You can be the one to offer it to them. And you'll have leverage with the mortgage lenders. In order to avoid the hassle and costs of taking the home property back themselves, the mortgage lenders can often be persuaded to discount what is owed on their pay-off. In this manner, you can negotiate instant increased equity. And best of all, you can make an offer that is subject to being able to take over the financing already in place. As you can already see, this can be a win-win deal for you, the owner, and the lender.
Be sure to always keep in mind that you're not the only property investor on the lookout for a bargain. Like you, other foreclosure investors are probably meticulously going through the foreclosure listing sites as we speak, looking for a potential pre foreclosure investment. But as long as you take the competition into account, and plan your strategy, you can sweep up the deals you want.
Timing is everything.
Your aim is to be the first to locate a promising property. For this reason you really want to try and catch a property in pre foreclosure, that is, before it gets to that stage in the foreclosure process where it is to be auctioned off or sold via a trustee sale. Therefore, like other pre foreclosure home buyers, you should be monitoring the latest notices of default filed with the relevant county recorders. But how do the other buyers do that? Because timing is everything, the savvy buyers go online to get this information instantly for any county. This by far is probably the best method. The other method would be to visit the county recorder offices on a daily basis.
If you're the first, or one of the first to identify a possible pre foreclosure investment property, you have the opportunity to contact the home owner first. But realistically speaking, don't expect to be the only one contacting them. They will likely receive a bunch of letters, phone calls and personal approaches from other potential buyers. But being among the first gives you an advantage over the others.
You must stand out.
Try a different approach. Perhaps send a creative mail piece and follow up with a phone call. You can try mailing something that is bulky so your envelope is fat and lightweight. You can try sending lottery tickets, an audio CD, or a bunch of flowers. There are lots of ideas to grab their attention. Turn the table around and think what would get your attention if you were them.
Be genuine, not gimmicky.
Being genuine and credible is vital for building trust, and here's why. Most home owners experiencing foreclosure are not only under a lot of stress, but are probably not familiar with how the foreclosure process works, what to do, and what to expect. If you can be that someone who helps them through these distressing times, you'll have a good advantage over everyone else. Just be open and willing to help, and readily provide them with your background information and credentials in order to establish trust.
This is a people business.
You don't talk to house structures, do you? It is people that decide to sell their houses and ultimately, people are emotional beings. The better you can relate to the sellers, the more successful you'll be since you are associating yourself to them at an emotional level. This is particularly true during their foreclosure situation which is a time when they need empathy and someone to really understand their situation and guide them on what to do.
Value the home.
If you're not completely familiar with the neighborhood and the type of property you're looking at, you should probably hire a professional appraiser or local real estate expert to assist you with the home valuation. Whether you decide to hire an expert or do it yourself, understanding the market value of the pre foreclosure property is extremely important for working out the best possible deal for both the home owner and yourself.
Persuade the home owner.
To end up with the best deal you need to persuade the home owner that it's in their best interests to sell the distressed property to you. Very often that's true, and they are much more likely to get a better deal if they sell at pre foreclosure than allow the home to go into foreclosure auction. With that said, a good idea is to educate them on the options available to them at this point and explain how the deal you're presenting to them is likely to help them more than if they decided to sell to another, or allow the foreclosure proceedings to continue down it's path.
Among the points you might mention are that, by selling to you, the home owner will in fact avoid foreclosure of their home, save their credit history from ruin while they get paid for their equity. Naturally, you must be certain that the deal works for you too. Remember, it's not worth it unless you're confident you can make the return you want.
