Ron gives some great advice here. It is important to disclose fully to the seller what your intentions are. I disclose everything I intend to to with the seller on each deal, so they will know everything EXCEPT the exact amount of my assignment fee. Will you lose a few deals due to this disclosure?..YES…but you will close more than you lose by being upfront and honest with the seller.
If you are effective in making the seller understand the ramifications of a foreclosure and/or a bankruptcy on their credit, then they will be less inclined to resist ANY actions you need to take to get their house sold quickly! All preforeclosure sellers are going to be in some state of denial, frustration, anger, and embarrasment…the key is to override those emotions with a clearly communicated fear of the inevitable…which is that the worst case is for them NOT to act!
My advice to any other newbie like me who is farming preforeclosures…learn the foreclosure process and Chapter 13 process from top to bottom, in and out…because the better you know it, the better you can communicate it to the seller. The reality is…by the time they call you or you find them, the situation will be:
1.) They won’t have enough time to sell the house themselves or through a realtor.
2.) Bankruptcy will stop the foreclosure sale, but it will not solve their problem…not only will they have to pay the agreed upon payment to satisfy the back payments and fees, but their regular mortgage payment, which they were already having difficulty paying, will resume. Make sure they understand that Bankruptcy means they will be paying MORE than they were before. I agree with Ron on this one too…consult a real estate attorney for better understanding.
3.) Their lender is likely highly ticked off by this time, and won’t really be agreeable to any arrangement that would prevent the foreclosure.
Drive this home, and your negotiations will be easier!
You might leave deals on the table until you do an effective job driving these points home…once you develop this skill, the deals will begin closing.
As far as contracts…find and REI club that teaches! My club has a class every month taught by our club president that teaches the TREC 20-7 contract from top to bottom. I believe the class cost a whopping $30. You can also check your local community college, but I recommend a investor based course, because they will show you things that are more specific to what you are doing. For example, they can show you how to word statements in certain sections that will allow you to escape out of a contract with all earnest money in tact in the event you cannot locate a buyer to flip the house to. These tricks remove much of the risk from the wholesaler.
I’m not sure where you should locate a good set of contracts for your state, buy the people in your local REI club will know and will be glad to tell you.