Foreclosure Buying Tips That Work

Foreclosure Buying Tip, Make an Offer to The Owner

Making an offer directly to an owner before their property is foreclosured and auctioned requires timing and patience, but can pay big dividends.

Here's a little rental house we purchased for 30% less than market value.

If the total of all mortgages and liens is far less than the owners equity in the property (based on your findings from the Appraisers records and the information in the case file-if you need help see my mortgage foreclosure tutorials) send out a flyer. 

Foreclosure Buying Tip: Send a Flyer

The best Foreclosure Buying flyers are short, to the point and well prepared.  Use 1/3 page high gloss paper with a sold sign as the background image, it works. Have the flyers professionally made, a quality first image can make the difference between successful Foreclosure Buying and the trash can.

Upon contact by the owner be prepared to dodge the bullet, they will ask how much is being offered.  Resist the urge, at this point it's best not to divulge anything, face time = trust. Inform the owner the price is based on an analysis of the property and your comparable property findings in the area.  It is difficult to make that determination over the phone without first viewing the property and driving the neighborhood.  Ask about the features of the home, the neighborhood, proximity to a park or mall, ask the owner what he feels is the best and worst feature of the home and ask to see the home.  Also request that everyone be there who makes the decisions about the home.  That way you can address everyones questions and concerns at one time.   Make an appointment as soon as possible. 

Foreclosure Buying Tip: FIRST VISIT

At the home inform the owner that the home will be accepted without the need for fixing, painting or repairing anything, as this will save him thousands of dollars.  You will be paying all of the closing costs which again will save him a considerable amount of money.  Ask the owner what he hopes to receive for the property  and what his concerns are.  If he brings up the pending foreclosure, inform him that it can be resolved and paid in full saving his credit from further damage.  

Note: Make sure if you are going to finance the property  you have spoken to your  mortgage broker before offering these terms to the owner.  An FHA home inspector could kill the deal by requiring repairs to be made prior to approving the loan, there are other less stringent lenders but it may cost you extra points in interest.  Make sure you can qualify for the loan.  Make sure that you have a minimum of 45 days between the date of contract signing and foreclosure auction, this will give you time to close. 

Always compliment some aspect of the home before you leave.  If the amount the owner expects is ridiculous,  inform him that his price may be out of your range for the area but you will be  fair in your pricing.  If he wants more than you want to give, wait 3 days before contacting him further. 

Foreclosure Buying Tip: THE CALL

You already have an idea of the equity he has in the property, call and make your pitch.  If the offer is rejected remind him that you are paying all closing costs which will save him about $2,000.  If the property were listed by a Realtor it would cost an additional 6%, if the Buyer comes from a Realtor then he would be expected to pay 3.5% percent.  If you were to repair and replace the bathroom tile it could cost an additional $1,500, considering these costs you feel that your offer is fair.  Don't bring up, "if you lose your home in foreclosure," people get upset, uncooperative or mad, even though it is true.   If rejection is there, inform him that he doesn't have to make a decision right now.  Your last statement should be the hard numbers.  If you were to make the repairs, pay the closing expenses and Realtor fees you would have to sell your home for over $80,000 while paying taxes, waiting for a buyer and making repairs. 

Foreclosure Buying Tip: SECOND VISIT

Wait two days, drive by the property, up the bid by $2,000 and inform him that is the most you can pay, you really like the property and wanted to thank him for his time.  Make sure you have a purchase agreement with you. You can pick one up at OfficeMax or OfficeDepot or get it from me here After signing, fax the contract to your local closing agent. Never give a deposit directly to the home owner, forward it to the closing agent to be held in escrow.

Foreclsoure Buying Best Tip:
Mimicking posture, tone and match the hatch. 

I was informed by an old insurance agent, who had many personal clients that you have to, match the hatch.  He had an older model truck he drove when meeting clients while living in a very nice waterfront home in Dade county and otherwise driving very nice cars.  Tony never wore a suit, most of his clients were lower middle class and farmers from Homestead.  If you look, dress and feel as the owner does, it gives you credibility, likability and trust.     

If the owner is a fast talker with a latin vibe using hand gestures and standing  upright while looking you in the eye, do the same.  Never look away, it shows dishonesty or deceit for many, stand as they do, speed up your pace and use your hands.  If you are perceived as an equal, it too can gain you face time.  You can say a lot of things wrong and be forgiven, but if you are untrusted or don't fit the profile you will rarely succeed. I had a lot of Dade County clients from Cuba, Dominican Republic, Puerto Rico, Jamaica and elsewhere and they all loved me.  I matched the hatch for them, even though I am not latin.

Foreclosure Buying Tip, SHORT SALE BASICS

If the above approach isn't working for you, you may want to try a short sale. A short sale requires the cooperation of the bank, the owner and yourself. Basically the short sale is an agreement that the owner receives no money from the sale, the bank accepts less than the amount owed to satisfy the mortgage, you agree to take the home as it is.

Foreclosure Buying Tip: Get Interest in Property
The first order of business is to obtain an interest in the property via an option to purchase. The option to purchase will have the normal option agreement cluases including the price you are offering for the property. If you want to attempt to flip the contract you can place your name as buyer and/or Assigns. Typically banks don't like assignable options or contracts.

Once this is in your possession you can obtain mortgage information from the Loss Mitigation Department at the bank. Upon contact with the bank you will want to request a short sale package or information on short sale procedure(it varies widely by bank).

The owner will have to draft a letter of dispair, stating what catastrophic event has created his non payment of the mortgage. This will be mailed back to the bank with the information provided in the short sale package.

If the bank excepts the proposal, you then execute your option to purchase.

Foreclosure Buying Tip: My Opinion
There is much more to the process than what I am supplying here, I typically hire a realtor to conduct this work after I receive the call from the owner and view the property. More times than not, the realtor contacts us to inform us of a short sale deal he has found that we may be interested in. If you are looking for a trusted realtor and short sale opportunities, there are many properties which have already gone through the foreclosure process and are available. Normally, the banks won't discount as greatly after they have foreclosed but it never hurts to try.

Here is a link to locate available short sales in Hernando County.

Foreclosure Buying Hernando Short Sales

Foreclosure Buying Tip: Flipping Contract
Again if you are attempting to flip the contract, you will also need a NonCompete NonDisclosure Agreement with your perspective contract buyer, otherwise they will find a way to get around you and buy the property. Most realtors won't assist you if presenting an assignable option because they lose their commission if your contract buyer defaults or the bank refuses the offer and the property goes to auction. Both of these scenarios happen frequently. Contract flipping and tutorials are available here.

The information found here is my opinion and should not be interpreted or construed as legal or professional advice. No legal or professional advice is being given and the use of this information is at the readers own risk and peril. It is advised that those considering this investment should seek qualified legal and professional services.

Mortgage Foreclosure (on nav bar)
The portal page for Florida Mortgage Foreclosure Investors.

Foreclosure, What is
Foreclosure Types, What Is & Why Buy, Find Your Free Auction List.

Foreclosure Auction Basics
The Basics, Winning Strategy, Requirements

Foreclosure Liens
You had better know what is superior before you bid.

Foreclosure Lien Finding
Locate Liens and Mortgages using the case file.

ForeclosureInfo
What can be found where, creating a superiority checklist, chain of title tips, foreclosure file retrieval.

Foreclosure Buying
Buying foreclosures before the auction. The winning strategy for buying from the property owners. Short Sales Info.

Foreclosure Deals
How to contact the bank first, after they obtained title from a foreclosure sale. Be first and win.

Foreclosure Research Tips
D.I.Y. title search, title reports, info on how to conduct due diligence.

Foreclosure Profits
How to keep your profit and save big money with these tips.

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