Wholesaling is a time-efficient niche for the right real estate investors, but you need to understand how to bring properties to the market to make them work as the engine of your income. Individual deals provide modest returns in this niche. Still, they do not take long for experienced investors to close, so there is an opportunity for high income through high transaction volumes.
Foreclosed properties and those entering the process at pre-foreclosure present great opportunities for wholesalers because many sellers look for the fastest way to recoup costs and close. If you can bring them a deal instead of making them wait for a sale at auction, they will often take the sure thing.
What Is a Foreclosed Home?
Foreclosed homes are bank-owned properties that were used as collateral for mortgages. When homebuyers default on a mortgage, they are given a limited time to correct the situation or sell. This time is pre-foreclosure, and many do choose to sell. If the loan is still in default at the end of this period, the bank forecloses, repossessing the property until it can be resold to recoup the cost of the outstanding debt. Once the bank possesses the property, it is in the institution’s interest to liquidate it quickly, before property taxes pile up.
Are Foreclosures Good for Wholesaling?
Foreclosures can be the best source of cheap stock for wholesalers with the right business model. There are many other viable options, but bank-owned homes and pre-foreclosure properties are both great opportunities for dealmakers who know how to find a buyer.
- Sellers are motivated to move the property
- Banks and other lenders look to recover their costs first and foremost
- A direct wholesale transaction is more straightforward and faster than an auction
- Sellers in pre-foreclosure can recover a portion of their expenses instead of losing the additional value to a lender at the end of the process
The key to working the foreclosure market for wholesale prospects? It’s as simple as knowing how to get the edge on lead generation.
Finding leads for this niche is not hard, but it does tend to take some financial commitment. County clerks offer public lists of foreclosures and pre-foreclosures, but those lists often come with copying or document processing fees. There are also other options, including map search and lead building software designed to put the contents of those lists in your hands. Just search the map for foreclosures, then hone your search to match the types of properties you deal in.
Building your list from a map research tool is usually the less expensive option because it allows you to narrow down searches to key neighborhoods or property types. This gives you less to sift through than a complete list of all the properties within a county going through the foreclosure process. It also allows you to check out property details ahead of a trip out to look at the building.
- Build lists around specific sets of clients
- Work with area investors to find off-market properties
- Carve out a unique niche in the real estate investment community
- List by neighborhood so you can track your holdings in high-demand areas
If you build a custom list using a map search tool, look for properties flagged as foreclosures, but keep looking past that. You might find a bank or private investor who owns a large chunk of properties in key neighborhoods, and those properties could also be worth looking at. They could be old foreclosures that have yet to sell at auction or otherwise, but even if they are not, they often represent another source of off-market properties.
Still, thinking about whether wholesaling foreclosed homes will work for you? There are a few points to keep in mind as you make your decision:
- Lead generation and list building tools like BatchLeads can streamline a lot of your workflow, helping you close more deals
- Owners in pre-foreclosure and lenders holding foreclosed houses are both pools with a lot of motivated sellers
- Building a reputation as a wholesaler means developing a steady supply line for buyers, and foreclosures happen every day
- Search by neighborhood, county, and property type to hunt down the perfect building for known buyers when you identify them
If you are serious about wholesaling real estate, going with BatchLeads is an easy choice to make.