How To Market For SUB2 DEALS

General Real Estate Investing
1

Hello,

I am just now getting into this whole sub2 niche, and I would like to get some input on the best way to market for sub2 deals.

I have just used listsource to scrub data for my mailing campaign.

Below are some of the filters I used:

  1. Property owners that have between 60-90% loan to value

  2. Property that was built in 1997-2007

  3. Property where the mortgage is neither an FHA or Va loan (my title company in Texas wont do these sub2 deals on these type of loans)

  4. Properties where this is a lot of new construction and growth potential, but the market is still pretty level. (slowly going up, not going down)

I have sent out 1000 postcards to this mailing list which basically states that we are interested in buying properties with little or no equity.

Can anyone give me examples of which mailings you have done that have good results?
Thanks

2

I’m excited for you! You’re gonna be raking in some serious money in very little time.

Your filters are OK for now. Once you get some money coming in, you need a more professional source of leads. I recommend real quest (owned by the same company that owns listsource).

On that note, you need to contact listsource, and verify that their list was abstracted recently. Otherwise, you’re gonna be sending to a BUNCH of dead ends and undeliverables.

You don’t need a title company to close on a Sub2 deal. You need the deed and the ability/willingness to record the deed.

Of course that’s not all you need to do, but the bottom line is that if the title is clear (apart from the loan(s)), you can record your own deed.

Later, when your end/user/buyer pays you off, the title company will close on ‘that’ deal down the road. You also don’t need to take another title policy to buy, as long as you’ve verified the title is marketable, subject to the existing loans.

Beware of the low-income, subsidized FHA loans. They are illegal, in the most explicit terms to take over Sub2. They require the original borrower to live in the house (for a period of time). Anything else is fine, including VA loans and conventional FHA loans, etc.

Find another title company if the knuckleheads at your current TC are this incompetent that they can’t/won’t do Sub2 FHA/VA loans. That’s ridiculous.

We want to send out at least 3k pieces of mail a month to achieve a critical mass of lead generation. Of course, the response and conversion rates are “HIGHLY” dependent on the quality of your list.

You might want to sort by square feet, no. of beds, lot size, and building type. Ie: No manufactured, mobiles, ranches, condos, or weirdo properties for us. We like about anything that is at least a 3/2/2 on a 6k sqft+plus lot, that needs nothing.

FWIW

3

Javipa you are the man! Really good information. :beer May I ask if you are sending out a post card or are you sending out actual letters on your mailing campaigns? When you do send out this campaign, are you specifically looking for properties that you can take over subject 2 the loan balance?

I am so into this creative style of investing. Always CYA and you will make money.

I swear, it does not matter how much you think you know about RE investing, sites like this help you to learn a hell of a lot more.

Thanks again Javipa.

4

Yes. We are mailing postcards (mostly) to Sub2 prospects specifically. Our goal is to send mail that is primarily designed to resonate with, and generate the most curiosity, within a very tightly-sifted mailing list.

BTW, our mailings should not be treated, or considered to be, ‘campaigns.’ Campaigns are for politicians. Those are temporary efforts. We should approach our direct marketing as a chronic series of endless exposures of our message.

That otherwise means mailing once a month, every month, until we retire, die, or have enough referral leads to keep us going …or made all the money we want; whichever comes first.

That’s why it’s good to spend money on a well-sifted, updated, accurate list, because it’s something we’re going to use over and over again.

However, that doesn’t mean we don’t buy updated lists every so often that will automatically include new records, and eliminate the ones that become outdated.

Meantime listsource, will sift out records we’ve already purchased so we’re not buying the same records twice.

Thank you for the compliments, btw. I appreciate it.

5

Java,

Thanks for your response, (I was hoping you would respond, and you did)! Very informative information, I really appreciate it.

One thing that you mentioned has me a little confused.

You stated that “you dont need a title company to close a sub2 deal”

I know each state is different in their laws. Maybe California has different laws than Texas, but I wanted to run this by you.

In Texas, there was a law that was passed called House Bill 2207 Below is what this law states:

Sec.A5.016.AACONVEYANCE OF RESIDENTIAL PROPERTY ENCUMBERED
BY LIEN. (a) This section does not apply to a sale of residential
real property where the purchaser of real property obtains a title
insurance policy or a commitment for title insurance insuring the
transfer of title to the real property.
(b)AAA person may not sell residential real property that is
encumbered by a recorded lien unless, on or before the seventh day
before the effective date of an executory contract binding the
purchaser to purchase the property, the person provides the
purchaser and each lienholder a written disclosure statement in at
least 12-point type that:
(1)AAconspicuously identifies the seller, lienholder,
and purchaser and includes the name, address, and phone number of
the lienholder if the lienholder is a person other than the seller;
(2)AAstates the amount of the debt that is secured by
each lien;
(3)AAspecifies the terms of any contract or law under
which the debt that is secured by the lien was incurred.

In my interpretation of this law, It says one of two things.

  1. In order to convey property that is encumbered by a lien, you must notify each lien holder in writing that you are now planning on purchasing the property that they have an interest in. (To me, this is not a good thing, because now the lender knows that another party is trying to take over this property, and this could cause them trigger the due on sale clause.

  2. If the purchaser obtains a title insurance policy or a commitment for title insurance insuring the
    transfer of title to the real property, then none of the lien holder have to be notified.
    (This seems like the better option of the two, however, this may eliminate the kitchen table closing, and make these type of transactions more costly to close)

I am talking to a few attorneys right now that can hopefully give me a clear understanding of how this process works. I would love to just get a bullet proof contract that covers my ass, and run my own title, then close at the kitchen table which would help me eliminate expensive closing costs, but it might not work here in Texas.

I will keep you posted on my findings, but maybe you can shed some light.

Thanks

6

There is an excellent work-around that one of the moderators on this forum outlined ( Bluemoon ?) in dealing with Texas’ goofy law. I wish I had bookmarked the thread. I see this question repeatedly and keep forgetting the answer.

7

Just spoke to an attorney,

Apparently you can do a kitchen table close. There is not much bite in the new house bill law.

I will treat cautiously, and please get advice from your own attorney.

Thanks for the input Java!

8

Java,

One quick question for you.

In your opinion, would you recommend marketing to a Notice of default list for scooping up sub 2 deals?

It seems that these people would be excellent candidates for a Sub 2 purchase.

Can you tell me what your thoughts are on marketing to this list?

9

We don’t market to people in default.

The main reason is that there’s so few NOD deals that makes sense after curing the default.

Now, a better opportunity is to find people (not in default) with little, or no equity, and pitch them on an immediate sale where they don’t have to come out of pocket.

One of my favorite prospecting sources for these folks is failed escrows. Those are MUCH more profitable for the time spent, than marketing to NOD victims. Just saying.

10

Javipa,

When you say that it does not make sence for you to market to NODS, is it because you live in california where housing prices can reach in the $500,000 Plus range?? I can understand a house that is 3 months behind with a $4000/mo mortgage (including taxes and insurance). That would be a tough deal to make unless the house had some decent equity.

My thought was that here in Austin, The average house is under $200,000, and most of the houses I am trying to take over will be between $130k to 250k. Here in Texas, We have one of the fastest foreclosure laws. A bank can foreclose on a property in 41 days here in Texas.

My thinking was that if I only had to shell out 3-6k to catch someone up on payments and the home had decent equity, It might be a worth while proposition, Not to mention, the thought of an impending foreclosure is definatly a motivational factor for some one wanting to get rid of their home quickly and save their credit.

Thanks again Javipa,
I appreciate your input!

11
12

Ok Javipa,

I dont expect you to spill the beans on all your secrets, but here is one burning question on must ask.

Were do you find failed escrows?? Im guessing this is information you would get from the title companies??

13

A starting place is the MLS. How ever you can get that information is up to you. Make friends with a RE broker; become an agent; subscribe to the MLS.

Failed escrows (expired listings) are ‘dead’ deals for listing agents, but if you give the listing agent (or a shark agent!) a small incentive to refer these sellers …on deals they would otherwise have wasted time and money attempting to market … you might have a winner.

Find an agent that isn’t doing a lot of business; the hungry/incompetent/retired kind that maintains access to the MLS.

You’re gonna need the situs addresses for the failed escrows. You don’t need the owner’s name at this point. Just mail your card/letter to the address ASAP after the failed escrow. Timing is EVERYTHING here.

Additionally, you could send to stale listings, before the failed escrows happen. And you realize that a large percentage of listings have more than one escrow, and finally fail, right?

I’m giving you good ‘no-budget marketing’ juice here.

You could advertise for failed escrows.

When you’re ready to make the big bucks, I’ve got more efficient and elegant ways to find the sellers that are ready to crawl naked over a pile of fiberglass to make a deal with you.

You’re gonna spend more time and less money, or you’re gonna spend more money and less time, uncovering the motivated sellers.

It’s gonna cost you one or the other. I suggest spending the money. Your time is irreplaceable. Money? Not so much.

14

Javipa,

You are the man! Excellent EXCELLENT info!

Going back to my 1000 mailers, I have received 3 phone calls so far from my mailer, I have only gotten 15 returned postcards back, So the list appeared to be fairly updated. I was expecting to get more phone calls, but this is my first mailer, so I will tweak my list, and keep pumping them out every month.

On my most recent mailer (last week) I only mailed out to owners with 60-90% LTV. I think the next mailer I will change that number to 75-100 LTV in order to weed out sellers that have too much equity, and may not have the need to sell using this strategy.

(by the way, I used listabilityonline.com, not list source to get my mailing list. I already subscribe to and use realquest.com for running rough comps and sending out mailers to my absentee owners. I think I pay 150/mo and they give me 4000 Free names per month for my subscription.

anyhow, I just went on my first 2 appointments this week. one deal is an 80k house where the seller owes 65k. they are one month behind on their payments, and they need out ASAP. ( they rented the house out and the tennent is bailing) The homeower wants to move to california on march 1st. The home is not in the best area of town, even though its a nicer newer home. The mortgage is 525/mo piti, but rents in that area are only going for 550. To be quite honest, I am not very hot to trot on this property, even though I could easily pull it off… I am going to pass.

The second house is a whole different animal. 3600 sq ft house worth 225k where the seller owes 153k. The house needs 20k in cosmetic repairs and the home owner is current on payments. THis guy is not in a hurry to sell, and it appears from our initial meeting that he is not motivated at all!! I offered him $20k Cash for his equity and explained to him that we would be willing to take over the payments going forward. I told him that if he was wanting to sell with an agent, that he would have to put 20k to spruce up the house, then he would have to pay 8% of 225k to a broker and closing costs just to sell (18k) plus he would have to still make payments on taxes, mortgage and insurance until the home sold.

I explained to him that this was a fair offer, and that one bird in the hand is worth two in the bushes. He said he will not sell for anything less that 45k… I told him good luck, and if he changed his mind, to please give us a call, and have a nice day.

The third lead I am following up on tomorrow. So far, I am just getting my feet wet, but I am very excited about this new strategy (new for me). I hope to get some more phone calls, but now up going to beef up my marketing efforts next week.

Going back to you last post about failed escrows… I will be talking to my agent and having her mail me all the expired listings that took place this month, and every week going forward. I see this as an excellent opportunity, and I appreciate you sharing your wealth of knowledge here on the board.

You mentioned that you have a marketing system that will cost more money, and have faster results.

I have a decent marketing budget to work with, so If your inclined to share your knowledge, I am all ears!!

Thanks again Javipa!

15

Here’s the work-around I mentioned earlier:

http://www.reiclub.com/forums/index.php/topic,52808.0.html

16

Thanks javipa.

17

Hi all, just getting back into the REI game. Took a break when the $@!; hit the fan in 2007-2008 when I was sitting on 6 flips. Anyway, I’ve been reading up to get back up to speed with the current market and strategies. Just wondering if anyone wanted to share their letter or postcard verbiage targeting sub2’s or possibly some examples.

Thanks in advance!

18

Javipa and anyone else who feels like chiming in. I know this sounds like a stupid question, but I’ve never bought a list before. I plan on going to realquest if that is still a good source. This list of people in your filters/criteria, are they all selling their properties or are they just random people in your farm area? Also, do you use services like click2mail for your postcards?

Thanks