If you want to make money as a real estate investor, knowing how to find off-market properties is essential. On the surface, this may seem like an impossible task, but the good news is that not everyone has the time or flexibility to list with a real estate agent.
One of the most common motivated seller scenarios is pre-foreclosure, and it provides a simple way to make easy money in real estate. This flash guide will teach you how to capitalize on pre-foreclosure opportunities in your market.
What is a pre-foreclosure lead?
Pre-foreclosure is the first stage of the foreclosure process. It begins when a homeowner falls three months or more behind on their mortgage payments. When this happens, the mortgage company issues a lis pendens to announce their intent to take legal action against the homeowner. Afterward, they may issue a notice of default, which announces their intent to possess the house if the homeowner doesn’t catch up on their payments.
Why do pre-foreclosures make great investments?
Unfortunately for the owner, catching up on mortgage payments is rarely an option. That leaves one choice: selling the property and paying off the debt. However, selling with an agent on the multiple listings service (MLS) can take several months, which a distressed homeowner doesn’t have.
As a real estate investor, you can speed up the process by offering the owner a quick, cash sale. In exchange for this convenience, you’ll buy the property at a steep discount. Whether you’re wholesaling, fix and flipping, or adding to your rental portfolio, this makes investing in pre-foreclosures an easy path to profitability.
How To Buy a Pre-Foreclosure Home
Finding the Right Properties
Pre-foreclosures are a matter of public record, so you can use your county’s public records office to gather pre-foreclosure leads. However, this manual process is time-consuming and doesn’t give you the information you really need to make a good investment.
If you want to quickly build a pre-foreclosure lead list and also find detailed owner and property descriptions, a real estate lead generation platform is your best option. The right platform will speed up your workflow and give you vital insights that will increase your chances of converting a lead into a deal.
With the right lead gen platform, building pre-foreclosure lists full of valuable information is easy.
Market to property owners
Once you have a good pre-foreclosures list, you’re almost ready to reach out to property owners. To engage with them, you’ll need their contact information, but you can easily find it if your lead generation platform is built on quality data.
Once you have this information, you can cold call owners, build rapport with them, and make offers on their homes. Another option is to launch direct mail campaigns. It’s the more expensive and less direct option, but it avoids increasingly restrictive telecommunication laws that are impacting high-volume calling businesses.
Negotiate your deal
Once you connect with a potential seller, it’s time to make an offer on their house. Remember, you’re trying to buy the property for as little as possible to maximize your profits. To do this effectively, you’ll need to conduct some background research.
First, you need to know what the property will be worth after repairs. To do this, you’ll need to conduct a comparables analysis. Then you’ll need to estimate the seller’s remaining mortgage balance, which will show you how much the owner needs to sell the house for in order to pay off their debt and escape pre-foreclosure.
Once you have this information, it’s time to show the property owner why they should accept your offer. When you’re investing in pre-foreclosure properties, this is usually straightforward, but you should still arm yourself with advanced negotiation skills to make the process easier.
Pre-foreclosure leads are a great way to invest in real estate. The owners are highly motivated to sell, the properties are easy to find, and they often come move-in ready. All you need is an understanding of what a property is worth and how much to buy it for. If you have this information, the deal will practically negotiate itself.
Of course, there’s a lot more to learn about investing in pre-foreclosures, so if you’re ready to dive in, check out our complete guide to pre-foreclosure investing, which you can find here!