As outlined in my Conference Calls and Mastering Homestudy program — to be a successful foreclosure investor over the long term you must know — what type of real estate market you are in (hot, transitioning or cold) — and which buying system is best to find motivated sellers for your market. Of course you also must know the right approach, right system and right techniques so you can close your below market purchases.
Before we go any further, please remember these important words of wisdom:
- It’s never easy to buy AND easy to sell at the same time.
- You need to make your money when you BUY the property.
- Never factor in any past appreciation or project any future gains on your deals.
- There are deals in every type of real estate market! (You just need to know where to find them!)
Hot Real Estate Market = Pre-Foreclosure Equity Investing System
As discussed in our “You CAN Find Great Deals in this HOT Market!” column, we reviewed or super hot real estate markets (just about every state on a coast) and how my clients are still finding great deals, (despite the rumors that “there are no deals’ in their hot market). So how are they doing that?
It all begins with the first foreclosure notice (Notice of Default or Lis Pendens filing).
Once this Notice has been filed the owners are now “in foreclosure” and must do something or risk losing everything (their property, their equity and their credit) through a foreclosure auction.
For the last five years, there has been a tremendous run up in property values. All foreclosure filings are at record lows. But of those newly defaulted properties that show up on our list, those homes have more equity (the difference between market value and loans) than I have seen for 20 years! So the deals are overflowing with profits!
Months before the auction (trustee or sheriff sale) you should directly contact the owner whose home is in foreclosure, and form a relationship that builds their trust and confidence in you BEFORE you try to purchase their home. (Please read: How to Achieve Trust and Confidence).
Successful investors know that when they serve the owners first (by helping them keep their home with selfless recommendations and referrals) they will earn the owners’ trust and confidence over any other investor. This IS your competitive edge!
When the right time presents itself to offer to buy the home, and the owners do decide to sell, they will want to talk to that investor and to no one else. This relationship must be established early on and reinforced through your repeated follow-ups. (Please read:Â Why Don’t Owners in Default Just List Their House for Sale?)
Remember, you offer the owner in default many benefits such as:
- Stopping the foreclosure
- Improving their credit
- Cash for their hard earned equity (versus losing it all at the auction)
- Discretion (so their neighbors won’t know)
- A safe place to live
- Stopping the bill collector calls
- A fresh start
Do not insult or offend them with patronizing comments like “how did you get in such a mess?” or “Why in the world did you do THAT?” You must be their friend and treat them as you would your own family members. Serve them first. It’s okay if you don’t buy their house! If you end up in a deal together, it must be a win-win proposition, so make sure you know how to structure it. (Please read: Learn How HERE)
The #1 reason many investors do not succeed in buying “pre-foreclosure” investing is they simply do not gain the sellers trust and confidence FIRST. But instead, too many investors are GREEDY and try to close them on selling their home too early and too often!
Once the homeowners agree to sell you their home you will have to determine the most you can afford to pay for the property and still make your profit. (Please read:Â How to Do the Math) You will need access to cash to make up their back payments (and stop the foreclosure), plus give them some “walking money” to close the transaction, and give them a fresh start (and move them out!).
This cash does NOT have to be yours! It could be obtained from another investor, or money partner through a “contract assignment.’ (Please read: Money Matters columns for more ideas on how to finance your deals.)
Some hints on the structure of your offer:
Make sure your offer is contingent upon and “subject to” all existing liens, loans, etc. as listed in your purchase agreement, and that the list is a complete list of all debts. Make certain that the terms for repayment of these debts are accurate, and that you have the right to approve or disapprove the current status of all loans and of title. (Please read: How to Finance Your Deal “Subject To’).
Successful foreclosure purchases must conform to your State Foreclosure Laws. Do make sure you read up on and are familiar with these state laws in advance of writing your offer. (Please read: The Mechanics of the Deal). Normal purchases include full title insurance provided by the seller, as well as the buyers’ complete inspection of the property’s physical condition. (Please read: Failure to Buy Title Insurance can be a Costly Mistake).
The best part of buying directly from the owner is that you have an EXCLUSIVE deal. Contrary to popular belief, there is RARELY ANY COMPETITION when you have established a trusting relationship with an owner in default and contract to buy their house. (Please read: Too Much Competiton? (AKA: What Your Competition Does Wrong))
Once an owner in default sells his property, he just wants to get it over with quickly and easily. The idea of the seller calling many investors to get the best offer IS NOT consistent with reality. Once you are in — YOU’RE IN! There’ll be no “pack of bidders” to worry about, such as you what you would encounter if you waited for the Foreclosure Auction. (Read more about this next month.)
Remember, if you take the position of serving the seller FIRST, doing what you would want someone to do for you in a time of need, and treat these owners with RESPECT and DIGNITY…. You will find yourself in the position of buying homes below market value (even in a HOT MARKET) and making friends at the same time.
You will never worry about lawsuits or unhappy people calling you… because you live by the GOLDEN RULE and practice GOOD KARMA, are in a richly rewarding business… and are truly wealthy in every sense of the word!
Now THAT’S what I call living the life of a SUCCESSFUL FORECLOSURE INVESTOR! (Please read HOW HERE).
In next months’ column, we will discuss how to find deals in a “Transitional’ Real Estate Market. Some of you may have noticed a slight “softening’ in prices in your markets. Some of you may be worrying about what to do when the market starts to slow down. You won’t want to miss next month’s column, because we’ll tell you where to find deals and how to get the edge!
Until then, happy investing!
Alexis 
