How to Cash In On Foreclosed and Distressed Properties.

Let me start off by saying that there are multitudes of ways to purchase foreclosed and distressed properties. This is only ONE way. The following technique will allow you to purchase property with 20% or more equity. I know it works because I've done it myself personally and it's not easy. Unlike many midnight info-commercials promoting get rich quick schemes in buying real estate, you WILL get results if you're persistent.

The only thing I ask in return, once you receive results using this technique, is to email me a testimonial of your success. Also, please refer someone to our company for a mortgage and if a mortgage is needed for your transaction please use us.

Let's assume this will be a home for your personal use. The first thing you want to do is to get pre-approved for the maximum loan amount you qualify for before you start looking for a home. We will be happy to do this for you. This way you know when you find that 'needle in a haystack' you will be able to come up with money and close in a timely manner. Remember, you will have to move fast once you find the foreclosure because you want to buy the property before it gets auctioned on the courthouse steps. A month could go by, then all of the sudden you have a valuable property with the present owner wanting to sell to salvage all they can. Be ready when this opportunity arises because if you are persistent to do the following, it will.

Now all of your questions may not be answered in this article. This article will give you basic guidelines to follow.

The idea is to buy the property from the present owners before they are foreclosed upon.

The Courthouse.

Second step is the courthouse. Every courthouse has a different system in locating foreclosed properties. You will have to figure this part out on your own. It's sometimes hard to get info from the clerks at the courthouse so just be as polite as you can and DON'T GIVE UP! What you're looking for are the *case numbers* for all properties being foreclosed on in the last three weeks. Three weeks should give you a manageable list of property addresses to work from. Then every three weeks go back to the courthouse and get the next 2-3 weeks worth of property addresses. The nice thing about the courthouse is that they will never run out of foreclosed properties. J

OK next step. Once you have the case numbers you can review the files on each foreclosed property. They are public record. Look for a copy of the original mortgage, which is usually near the back of the file. If you cannot find it, skip the file and move to the next. You want to get in and out within one hour if possible. Skip thick files and condos. You are looking for existing residential homes 1-2 units to start with. Look for the original legal instrument called mortgage because it gives an accurate property address and county the property is located in. Your state may record this info in the NOTE as well. Write down the full names of the present owners as well as date of purchase and original loan amounts. Also, get the attorney's name and telephone number. In the lis pendens or attorney's motion to foreclose (again, terminology is different depending on which state you reside) should be the payoff amount. This is the amount the bank is demanding to be paid in full by a specified date. Collect that info as well.

Getting Into the Home

Take this info home. There are two things you can do. 1.) Mail them a letter asking them if they are interested in possibly getting together to see how you can help them. 2.) If you want to increase your results by 80%, find out their phone numbers, which can be found on the Internet if possible. I like to call because I can get immediate answers and appointments.

The Call

My call goes something like this, 'Hi my name is _______
I'm a private investor here in town. The reason for my call is that I noticed at the courthouse today your home is in foreclosure. That information is public record. I'm calling to see if we can get together and perhaps discuss your situation and possibly offer a solution that could help both of us. It costs nothing to hear what I have to say. Would tomorrow at 5:00 pm be fine?'

Objection: 'Well, can't you tell me over the phone?'

Answer: (No matter what the objection may be. Get the appointment) 'It would be difficult to offer solutions over the phone since I haven't seen the condition of the home yet.'

Which is true! The property could be totally trashed, and there is simply not enough equity after repairs to make the purchase of the property feasible.

The Mailer

If you mail a letter you will only get a 5-10% return if it's good. Which are great results considering the average mail piece only returns 1-2% response. Here is the sample letter I use. CLICK HERE

Once you get an appointment to meet with the current homeowners, then you need to act fast. Give yourself a few hours before you meet with the owners because you have to prepare yourself. Remember, don't waste your time on researching property value etc., unless the current homeowners have agreed to meet with you..!

Take a ride to your local county tax appraisers office where you can get the tax information on that property. Also public record. Find the name of the sub-division and research appox. 5-10 other properties in that sub-division.

Pay close attention to square footage and make adjustments accordingly to figure out the approx appraised value (market value) of the property. 'Rule of thumb' is that tax assessed value is about 20% below market value. Also, you will find the date of last sale, which will give you a purchase price. But be careful, this is not always accurate.

To be on the safe side make friends with an appraiser. If you tell them you will use them for all your business they may do preliminary pencil searches for you and give you a ballpark (within a few thousand) figure.

Next subtract the appraised value from the payoff that the bank is asking for. If there is 20% or more equity you keep the appointment. If not, call up and cancel the appointment with the current owners and move on to the next prospect.

Negotiate with the current owners that you will purchase the property and will give them $1500.00 more or less at closing. Depending on how much equity is in the home.

Master this you've got it made.

Now, the hardest part.

Reality check! If you're current owners perceive you as an opportunist preying on their desperate situation, you will lose. The homeowners need to feel that you're sincerely concerned about them.

You have just entered into a hypersensitive environment, so be careful. Homeowners will sense ill willed intensions immediately. If you upset them they will let the bank repossess the property before they would ever sell it to you. They have nothing to lose at this point and will risk what little they have left for principal sake. So tread water wisely. One most important characteristic to possess would be EXCELLENT LISTENING SKILLS.

Sadly, many homeowners truly believe that a last minute miracle will come to bail them out of their dilemma. They believe a relative or a friend will come through with the money at the last minute or they think that the bank will give them more time. Make sure that they know TIME IS WHAT THEY ARE ALMOST OUT OF! Sometimes they haven't accepted the fact that the bank is really going to kick them out of their home. And all of their personal possessions will soon be out on the curb side. Most will stay in the property until the last minute. Again, they hope for a last minute miracle to rescue them, BUT IT NEVER DOES!

This is your only chance to get them to sell you the property. If you don't the bank will surely profit from it. You must make them realize that once the bank takes the property they will be receiving NOTHING and that YOU are their only hope to salvage SOMETHING out of the home. AND THAT'S THE TRUTH OF THE MATTER.

Smooth sailing from here!

So assuming you get them to agree to sell you the home for the price your willing to pay and giving them some startup money. Have them sign the sales contract. You can get those at your local office supply store. Call up a local attorney to do the title search and closing for you. They can also give you legal counsel and assistance with contracts etc. Normally if you use the attorney to close your transaction and he earns a commission on the title insurance, you may receive his/her guidance free of charge. Also, make sure you include a contingency stating that the sales contract is contingent on a 15-day home inspection period acceptable to the buyer. That's you. Then have a certified home inspector, inspect the property and give you a report. Chances are that the sellers will not want to fix anything so make sure after your repair costs, the numbers still work for you.

The next thing you can do is call up the bank's attorney and negotiate the payoff. Usually you can get the bank to drop the 6 months interest that has been accruing and maybe the attorney fees. So now you just saved yourself another $3,000-$6,000. Once you have the sellers agreeing to sell you the home just make sure you close before auction date.

If this transaction will be for personal use, when it's all said and done and you receive 20% or more equity, you did good. Considering the average homeowner will pay market price for their home, you have just earned yourself a healthy profit!

That's it, you're done! Good Luck!

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