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Here's My Foreclosures Marketing Crash Course - Part 1

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foreclosedHey Moguls, Lex Levinrad back again with another great lesson for ya…

In my previous lessons here and here, we talked about distressed sellers who are in foreclosure or pre-foreclosure and why it is so important to understand foreclosure laws and the foreclosure process in your state.

Today, we’re talking about how to market to homeowners in foreclosure or pre-foreclosure or who are considering a short sale. And to do that, we have to know how to find these homeowners.

A little foreclosure refresher.

We’ve already spoken about the stages of foreclosure, which are pre-foreclosure, foreclosure and the foreclosure auction. The people involved in all of these are considered desperate sellers, but you can only market to homeowners in foreclosure while they are still in foreclosure…

Once they have already lost their house and it has sold at the foreclosure auction back to the bank, then the house is now considered an REO (real estate owned by the bank). At this point you can no longer market to these sellers since you would need to be talking directly with the bank.

About 20% of foreclosure auctions end with a cash investor purchasing the property, but the vast majority of foreclosure auctions end with the bank taking the property back. Since the bank has the mortgage, it doesn’t need to pay to get the property back and will typically just take the property back unless an investor bids higher than what the bank is willing to sell the property for or higher than the original mortgage balance owed.

This is rare and only happens about 20% of the time. This fluctuates depending on whether prices are rising or falling, but suffice it to say that the vast majority of foreclosure auctions end with the bank owning the property not an investor.

desperateOnce the bank gets title to the property, the house is considered an REO. The bank needs to dispose of the property as quickly as possible since banks are not in the business of owning real estate, but rather they are in the business of lending on real estate.

I’ll cover REO’s in another lesson, so for now, let’s focus on homeowners who still own their home – homeowners who are either in foreclosure or are about to go into foreclosure (pre-foreclosure). These homeowners may or may not be making their payments on time, but either way, they want out of their properties fast.

In many cases these homeowners will be substantially under water (negative equity) and will owe more to the bank than the home is worth. This can be because maybe they have lost their job or become disabled, or they might have to move to another city for a new job. Or, they might be so far underwater that they don’t think it is worthwhile making payments and waiting for their property to be positive equity.

Whatever the reason for them wanting to sell their house, one thing is certain - they are desperate and want out.

Your job as an investor is to find these homeowners. Luckily for you, in real estate everything is public record. Depending on whether your state is a judicial state or a non-judicial state, you will need to get either Lis Pendens leads or Notice of Default (NOD) leads (see the previous lessons for a detailed discussion on this).

It is worth noting that you can market to many kinds of desperate sellers in addition to foreclosure and pre-foreclosure, such as abandoned property owners, probate properties, people who filed bankruptcy, fire damaged properties and many other types of distressed sellers.

But for the purpose of this lesson we will focus specifically on marketing to homeowners who are in foreclosure or pre-foreclosure.

So grab that paper and pen and let’s get started!

The first thing you will need to do is get a list of homeowners who are in foreclosure.

partyIf you live in a judicial state, then you can purchase a list of Lis Pendens leads. If you live in a non-judicial state, you will be looking for Notice of Default (NOD) leads. You can get these for free by searching your county clerk’s website – although not all counties are online but most are.

This process, however, is cumbersome. In some counties, you can go to the court house and buy a list or get a free list of upcoming foreclosures. When I first started out investing in real estate, I used to do this… but I can tell you from experience that it is way too time consuming.

The best thing to do is to pay for leads from a leads service provider. There are many companies out there that offer this service. Simply Google “NOD Leads” or “Lis Pendens leads” and the name of your state to see many different lead providers.

Some lead providers charge you per lead and many have a minimum order of 100 leads. Other lead providers charge you a monthly fee to get access to their site and to get all of the leads. Usually, it’s cheaper for you to have access to all of the leads through a monthly subscription instead of paying per lead.

Let the marketing begin.

Now that you have a list of homeowners who are in foreclosure, you can begin marketing to them.

For example, Lis Pendens is the lawsuit that is filed by the bank when a homeowner has not paid their mortgage for 90 days. This does not mean that the homeowner will lose their house. It simply means that they have not paid their mortgage for 90 days. If the homeowner continues to not pay their mortgage, then at some point, their house will be sold at the court house.

It’s important for you to understand that not all Lis Pendens leads or NOD leads mean the homeowner is definitely going to lose their house. All it means is that they have not made their payments. And since this is public record, you are able to purchase a list of these homeowners…

offerNaturally, these are great candidates for marketing to. Since they are desperate sellers, they need to sell, and you may be able to help them. If you can get them to agree to sell their house to you, then you can buy the house, fix, flip, rent or wholesale it.

And that is why you are in this business – to help people and make some money, too. Homeowners in foreclosure are the best example of a distressed seller who needs to sell and for this reason they are a perfect target to market to.

You can get these lists as a spreadsheet, and then do a “mail merge” to create mailing labels. You can then mail letters, postcards or anything you want to these homeowners in an effort to try and talk to them about buying their house and solving their problem.

Unfortunately, competition from other investors will be fierce.

When I started investing in real estate, I used to get a stack of Lis Pendens leads from my mentor every Monday morning. I would then drive to as many as 15 properties in a day and try to talk to the homeowner. I did this for 5 months for 8 hours a day… and I DO NOT recommend that you do this since it’s not and efficient use of your time...

The only benefit of this approach is that you will learn your target market really well.

When meeting with homeowners in foreclosure, what always struck me is that the homeowners who did talk to me and invited me in – had a huge stack of postcards and letters from other investors looking to purchase their house.

In some cases, as many as 30 or 40 different items had been mailed to them. So, I repeat, the competition is fierce. And that means, you, my friend, need to stand out. And you won’t stand out doing what everybody else is doing.

And that’s exactly where we’ll pick up in Part 2 of this lesson… now that you know who to market to and how to find them, we’ll dig deeper into mailing strategies and talk about the types of mail pieces and how you can stand out from the crowd.

Hit Me Up

Do you have any questions about this lesson… about marketing and mailing to homeowners in foreclosure? Ask me in the comments section below.


Do It To It! Immediate Action Steps

Know the different stages of foreclosure including pre-foreclosure

Understand that you can only market to distressed sellers who are currently in foreclosure

Find a provider of Lis Pendens or Notice of Default Leads

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