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Finding Real Estate Pre-Foreclosures
| | Monday, March 03, 2003 @ 05:00 AM EST
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Contributed by: John Michael
John Michael Properties
Read more archived articles about Foreclosures
You can search Lis Pendens at your local courthouse, Recorder or Registrar of Deeds office.
The investing window of opportunity opens the day the Lis Pendens is filed, Lis Pendens is the notice that a legal action is pending, The window closes the day the property is sold at auction.
The time between these two events enables an investor to work with the homeowner and lender to create a workout
strategy or a purchase of the property from the homeowner before the sale date.
Evaluate Selections & Determine Potential
You know the default amount from the legal notices or service provider’s information. Now you must estimate the property’s market value. Subtract the default amount from the estimated market value to determine the gross equity in the property. This figure also reflects your gross profit potential. If there is little or no difference in the amount of debt and the market value, move on to another property. If there is a big difference, there may be enough equity in
the property to make a sizeable profit.
Contact the Homeowner
This is easier said then done. The homeowner is probably being bombarded with letters and calls from attorneys and bill collectors and has creditors showing up at his door. The only way to contact the homeowner is by phone, mail or in person, and chances are you will have a difficult time getting in touch with him.
Start with mailings. Indicate in your letter that you are a private investor looking for property in that part of town; Let the property owner know that you may be able to help him with his financial problems.
Demonstrating an understanding the homeowner’s dilemma will help your efforts. Indicate in your letter that you may be able to stop the foreclosure, save his credit rating and provide cash for use in paying his bills and/or for relocating.
Be professional and gracious in your correspondence. Invite the homeowner to call you at his convenience. If you don’t hear from him in a reasonable amount of time, say three or four weeks, follow up with another letter, perhaps worded a bit more urgently. As you get closer to the auction date you may want to send two or more letters per month.
Follow up with phone calls if you can. Be courteous, never pushy. Never interview the owner on the phone. Merely state that in order to determine whether or not you can help him, you will need to meet with him at the property. Make sure he understands that the meeting will be more productive and less time consuming if he will have the loan, mortgage and insurance documents available, as well as the foreclosure notices.
If you are going to make an offer on the property, you must have the loan, ownership, and debt or lien information. You must also assess the condition of the property and the property owner. Combined with the market value and the default amount, you have all the ingredients necessary to formulate your offer.
If you feel comfortable with it, you can visit the property in person. You may be confronted by an angry homeowner. Be polite and leave if you are asked to. Never, under any circumstance, snoop around, inspect or generally trespass unlawfully on somebody’s property.
Meeting the Homeowner
Use common sense and dress appropriately, something casual but not sloppy. Be sympathetic. Does the homeowner need cash? Is he waiting for a bailout? Will he go bankrupt? Find out. Review the loan and mortgage documents. Verify the loan amount, monthly payments, interest rates, taxes, etc. Review the insurance policies as well. Get all the pertinent information you can. Ask the owner if there are any other liens or judgments he may be aware of.
Inspect the property with the homeowner. Never comment on the owner’s lifestyle, just the physical condition of the property. Point out the obvious defects or items in need of major repair. Use an inspection checklist and record your information and estimated costs of repair.
Make no promises at this point. Make no offer or give the homeowner any money. Make an appointment to meet with him again if you think you want the property.
Note: John Michael is the author of many guides that can help you become more successful as an investor. See http://www.thecreativeinvestor.com/ChanPart-JohnMichael.html
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