If someone is about to lose their home to foreclosure, then you can guarantee they're feeling stressed. They're probably being bombarded by calls and letters from creditors, and for many people it all becomes too much to handle. They close their eyes and hope it will all just go away.
Reality is that it won't, and as an investor interested in buying foreclosures, the hardest part can be convincing the homeowner that they really are going to lose their house unless they do something about it. It can also be difficult to convince them that you really are trying to help them, even though you are helping yourself make a profit at the same time.
When you're dealing with foreclosures, time is of the utmost importance. You need to have enough time to bail out the homeowner and take over the property before it's too late. That's why it can be a good idea to subscribe to a foreclosure listing service - you get access to listings at the earliest possible time, and don't have to use your valuable time looking for potential foreclosure properties from other sources.
Many people facing foreclosure have spoken to an attorney, and are convinced that bankruptcy is their only option. In most cases this isn't true, but attorneys tend to stick to what they're familiar with, which is bankruptcy, rather than mentioning other possibilities such as:
- Sale by assumption
- Deed in lieu
- Straight sale
- Foreclosure presale
- Compromise sale
- Short payoff
- Workouts
- Assignment
- Injunctions
There are still more options than these, which shows that bankruptcy definitely isn't the only choice for the homeowner. When you're dealing with a homeowner in foreclosure, make it clear that you're offering an alternative to bankruptcy. Find out whether they really understand what bankruptcy will do to their credit history and how it will affect their future.
If you're serious about buying foreclosure properties, then you need to become familiar with everything that's required in the process, and check everything for every property you consider. These items include:
- Loan and mortgage documents
- Loan amount, monthly payment, and interest rate
- Any outstanding taxes
- Existing insurance policies
- Any other liens or judgments
Make sure you have enough information to complete all the necessary tasks before the foreclosure occurs. If there's not enough time, don't even bother starting. Having said that, learn as much as you can about ways to delay foreclosure, and help the homeowner to implement them all. If may just give you enough time to take over the property before the foreclosure auction.
Above all, focus on creating a solution where everybody wins. It's never an easy time for the homeowner, so be prepared for plenty of anger, frustration and resentment - some of which may be directed at you. Walk away if it's obvious the person doesn't want to work with you. Find someone who is interested in finding a solution, show empathy for their situation, put together a strategy to get the best possible result for them, and before long you'll find yourself with a good portfolio of investment properties.
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