How to Buy Pre-Foreclosure Homes in 8 StepsMay 10, 2022
We recently put an incredible deal together using the strategy of finding and flipping homes on their way to foreclosure, so allow me to lay the groundwork for how to go about it.
Where To Find Pre-Foreclosure Listings
- County court office: Laws and regulations differ from state to state, but oftentimes Notices of Default (NOD) are recorded with your local county court. Contact your local county court office and ask if and how you can search through their NOD filings.
- Online records: In some cases, counties provide property databases online. To check whether this service is available in your locale, you can visit your county website or search your county’s name followed by search terms such as “property data.” From there, you should be able to find any online records that are provided. Most county databases will provide the option to filter searches by property or document type, thus helping to create your pre-foreclosure list.
- Legal notices: You can also find properties that are up for pre-foreclosure auction by searching the legal notice section of the newspaper. This section will publish pre-foreclosure listings that will be going up for sale at a foreclosure auction. You can use the property data to search for the title company that recorded the NOD and then reach out to that company to obtain their list of pre-closure leads. However, note that this company may expect you to use them for your pre-foreclosure sale closing in exchange for their lists.
- Real Estate Agents: Since real estate agents have access to the MLS, they are a viable source for finding pre-foreclosure lists. They can narrow down their search in the MLS to only provide pre-foreclosure listings. Using a real estate agent means you will be getting professional help, and all the heavy lifting will be done for you. You will have peace of mind knowing they will handle any paperwork efficiently and correctly. They will be able to find a pre-foreclosure listing, schedule any appointments, and professionally negotiate in your place. You will have to compensate your agent, meaning the pre-foreclosure listing will technically be at a higher price to cover your agent’s commission. Also, you will have to work according to your agent’s schedule most of the time.
- Attorneys and Wholesalers: These professionals are familiar with working with pre-foreclosures, so they may be a valuable source for leads if they are willing to share them with you. Network and build relationships with attorneys who specialize in real estate, bankruptcy, foreclosure and probate, as well as any wholesalers in your area who have established buyers lists.
How To Buy Pre-foreclosure Homes in 8 Steps
- Start your search. Part of what is pre-foreclosure real estate is the trickiness of finding properties. Those wondering how to buy a pre-foreclosure home and find pre-foreclosure listings for free should be prepared to spend a significant amount of time in the research and marketing phases. First, you can search through online pre-foreclosure listing sites, including those published in the county records. In addition, some general real estate listing sites, such as Zillow, offer a pre-foreclosure specific search filter. You can also start marketing yourself as a buyer through the use of bandit signs or on Craigslist.
- Get in your car. Once you have identified a property or two of interest, it is time to hop in your car and drive by the property to get an idea of its condition. However, keep in mind that the owner may still occupy the property, so be respectful.
- Get status updates. When identifying pre-foreclosure listings, also make sure to write down the name of the trustee or attorney, which will often be the title company. You should contact the trustee to get status updates on the property, for it is not uncommon for homeowners to resolve their financial issues not to lose their property.
- Know your numbers. If the data is provided, note the property’s outstanding loan balance and liens. You can use available data points to get a rough estimate of the would-be foreclosure sale price. Then, subtract the amount it will cost you to acquire the property to come up with the figure at which you would break even.
- Launch your campaign. Once you feel prepared, it is time to launch your campaign to the owner of the property. You may be able to reach out to them directly by phone call, but most likely, you will need to design a direct mail marketing campaign. During this step, keep in mind that the owners are in a state of distress, so tailor your messaging in such a way that highlights the solutions you can provide while remaining tactful. Some homeowners may be in a state of denial, so you be prepared to follow up as necessary.
- Make an offer. If the homeowner is receptive, you may venture to ask for a tour of the property to help you get better estimates on the cost of repairs or renovations. The estimated figure should be factored into your break-even number before making your offer to the homeowner and entering negotiations.
- Compose a purchase agreement. Once you and the owner have reached a deal, it is time to put it into writing. It may be in your best interest to work with a real estate attorney or an agent specializing in foreclosures to help you compose a purchase agreement. Be sure to include any applicable contingencies, such as one for an inspection or title search.
- Enter escrow and close. Once both parties have signed the purchase agreement, an escrow company will serve as the neutral third party to transfer funds and ownership before closing. Once all contingencies have been lifted and the closing date has been reached, the property should now be officially yours.
Another strategy is to wholesale the pre-foreclosure purchase contract.
If you identify a deal and market that deal to your cash buyers list and make that connection, you can get paid a simple assignment fee. This strategy is a way to make quicker money without having to go and raise private funds to complete the purchase of the property.
This wholesale strategy is also a way to avoid paying the cost of money and closing costs. This wholesaling strategy isn't always the best move as most of the time, the long dollar is to be made when buying the property and reselling it after making repairs so you can full leverage the equity you've created. BUT, sometimes you need to make quick money and 5, 10 and $15,000 checks all help pay the bills!
For more deal examples and case studies, click here: https://www.pinkaffiliates.com/a/2147509595/Xxeg2Qz8
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