Stopping Foreclosures

If you as an investor understand the process, you will be able to help more people!

Foreclosure is tuff on folks it’s all about loosing!

Your customer’s looses their home and the lender loses money!

If you can get your focus going in the right direction, you can create a Win - Win scenario for all involved.

Writer and philosopher Johann Wolfgang von Goethe said, "Kindness is the golden chain by which society is bound together.

You need to act fast as an investor when dealing with people in foreclosure and one of the most difficult areas of this process is getting the property owner to act.

The longer they wait to act, the less time you will have.

When people face financial distress they feel powerless and confused, many in foreclosure spend too much precious time denying their predicament until the last minute when only the most extreme of remedies remain available.

Keep in mind that you will need to avoid to long of a foreclosure delay as the cost will mount up and may just drive you out of profit range.

It is vital that you help your customer to respond to any legal notice or document and assemble a delay strategy(s) immediately.

Many property owners facing foreclosure end up declaring bankruptcy as a solution to their foreclosure problem because:

  • They see no way out
  • They are unaware of options
  • Bankruptcy Attorneys contact them when the foreclosure is posted
  • Investors do not display empathy

Many believe that bankruptcy will stop their foreclosure and everything will be ok.

Many attorneys do not tell property owners that bankruptcy will only drive up the foreclosure cost.

Simply put foreclosure solutions are not well understood.

Over ninety percent of bankruptcy attorneys don’t handle alternative workout programs such as:

  • Straight Sale
  • Sale by assumption
  • Foreclosure Presale
  • Compromise Sale
  • Shortpayoff
  • Deed in Lieu
  • Workouts
  • Forbearance
  • Modifications
  • Assignment
  • Sale/Leaseback or Deedback
  • Hard Bargaining
  • Injunctions
  • Bankruptcy

Therefore, even though the attorneys may come across as knowledgeable and educated, their final advice on how to save a home is to tell people to declare bankruptcy.

Bankruptcy can be the right solution for some homeowners who are trying to save their home.

However, it is far from the number one choice. In fact, it should be the last resort. In talking to a bankruptcy attorney, one is led to believe that bankruptcy is the best and only choice.

Your major strategy as an investor is “buying time”.

If your customer goes straight to bankruptcy, all other options that could have bought time have been bypassed and are no longer available.

Having done that, if there are any problems making the Chapter 13 payments, there are very few options left. In addition, it may have been possible to get a work out solution approved instead that solved the situation without bankruptcy. This would also be a much better solution as far as saving credit.

Most people don’t realize how damaging a bankruptcy or foreclosure is to their credit until it’s too late. It is something that can follow a person for a very long time.

You will find that in most cases, people will contact you at what I call the too late stage, because their back is up against a wall and the auction is the next day or even the same day. In these cases, you as an investor have the option to bring the loan current and take control of the property or assist your customer in filing a bankruptcy to stop the sale.

This is done only to buy time, and the homeowner doesn’t actually follow through with their court appointments and filings and lets the bankruptcy “fall off calendar” (it never actually goes through).

Many of your customers will be in denial that they are about to loose their home, they will tell you it’s all worked out, they are not in foreclosure, they did not know and the list goes on.

It’s your job to get them to face the facts and how you can help them as an investor.

Now how do you deal with them, how to approach them and how to talk to them during this most difficult time?

My first step in the communication process is to send a letter to let them know I’m available to help.

The homeowner is probably being bombarded with letters, calls from attorneys and bill collectors, and has creditors showing up at his door.

The only way to contact the homeowner is by telephone, mail or in person, and chances are you will have a difficult time getting in touch with him.

Start with mailings. Indicate in your letter that you are a private investor looking for property in that part of town.

Let the property owner know that you may be able to help him with his financial problems.

Demonstrating an understanding, the homeowner’s dilemma will help your efforts.

Indicate in your letter that you may be able to stop the foreclosure, save his credit rating and provide cash for use in paying his bills and/or for relocating.

Be professional and gracious in your correspondence.

Invite the homeowner to call you at his convenience.

If you are going to make an offer on the property, you must have the loan, ownership, and debt or lien information.

You must also assess the condition of the property and the property owner.

Combined with the market value and the default amount, you have all the ingredients necessary to formulate your offer.

If you feel comfortable with it, you can visit the property in person.

You may be confronted by an angry homeowner.

Be polite and leave if you are asked to.

Never, under any circumstance, snoop around, inspect or generally trespass unlawfully on somebody’s property.

Use common sense and dress appropriately when meeting with the homeowner, something casual but not sloppy. Do not drive up in an expensive vehicle, as the homeowner will see you just like they see the lender as someone who is taking advantage of them!

Be sympathetic.

  • Does the homeowner need cash?
  • Is he waiting for a bailout?
  • Will he go bankrupt?

Find out the facts.

  • Review the loan and mortgage documents.
  • Verify the loan amount, monthly payments, interest rates, taxes, etc.
  • Review the insurance policies as well.
  • Get all the pertinent information you can.
  • Ask the owner if there are any other liens or judgments he may be aware of.

I look at investing as a mechanic - the more tools you have the more you can do - The more investing tools you have in your investors tool box the more people you can help.

Great info JohnMicheal,

Do you knock on doors yourself?

Do you know of a good door knocking course?

I just love knocking on doors as it builds the relationship that I need with my customer as it’s hard to sell one’s self with letters or phone calls.

I have a philosophy that my customer must like me and trust me to do business with me.

Door knocking is an art and you will find some great books on the subject at the public library on door to door salesmanship.

Most of us REI teachers do teach door knocking but you will find that this can be difficult to teach by way of forums or books but tapes and in person will provide a better understanding of this art of salesmanship.

It can be vary successful if one learns how to dress and speak correctly.

John Michael have you ever had anyone contact you back though a mailing? I have just recently sent a letter (after the second legal notice to) to a couple who maybe traveling down this road. I have never knocked on doors, I think it is more out of fear than anything else. I have made offers but not too many and have never purchased this way before. The deal, if it goes through is a steal, but I don’t want these people to think I am profitting on there misforture, but truely that is what would eventually happen. How do you prepare for this process, and also how do you not offend the home owner. Also what should I look for if I do get the opportunity to sit with the couple. Assumable mortgage? Bring them up to date and have them sign over the deed? Go to the bank with the owner and work it through them? Basically the ad (legal ad) says 70K* forclosure- sale is May 27, the areas homes are selling for 320+, its a great area w/ great schools. I thank you and appreciate your input in advance.

I do get a large number of replies from direct mailings but I do find most are over mortgaged or contact me at the last minute leaving one with the dilemma of what to do.

For this reason I advocate investors to learn all they can about the business or should I say “Put more tools in your investors tool box”.

One needs to learn all the methods of stopping or delaying foreclosures
How to perform a short sale
Learn creative strategies that will help on to acquire more properties
How to acquire “OPM” Other Peoples Money.

Knocking on doors can be down right scary and this is why I do it, as I know that most of my competition will not do it.

You are correct that you do not want your customer to think that your are profiting from their misfortune but the fact remains you are. I leave all my customers with the help thought - I negotiate based upon my customers need not the purchase price by asking two key questions:

If you sell the house what do you, plan to do?
If you do not sell the house what do you plan to do?

It is my philosophy to fulfil my customers needs and give them more than they expected.

I help them by stopping the foreclosure and in the process in most cases, the foreclosure does not go on their credit records.

I ask them to contact me in a year or two (When they recover financially) so that I can get them in a house again.

I build a trust with my customers - I negotiate in such a way that my customer tells me they are in foreclosure so that I do not have to.

Some essential key area’s you want to look for is the mortgage facts such as:

Balloon payments
Variable Rates
Pre Payment issues

Just to name a few - this is not all that you need to know but it is a good start!

Dear JohnMicheal,

What do you say when you knock on doors?

Is there a certain script, you use when you approach homeowners at the door?

Yes I do use a script.

With business card in hand I let them know I’m looking at buying a house in the area and if they are interested… (I use certain comments in this area based upon my customers attitude)

So you approach them as if you are buying it as a homeowner or an investor?

Just as a buyer not as a investor or wanting to live in the home.

Just an interested buyer