On Saturday at my local REIA meeting (everyone should be going to ALL of the REIA meetings in your area), I was talking with an investor who had received a nasty phone call from a homeowner who was not happy that they received a letter in the mail. They wanted this investor to know that they “did not want to sell their house and never to send them another letter ever again.” This investor was new and of course this phone call upset them. I reassured the investor that this happens and is the nature of the business.

The majority of calls that I get from these angry, crazy people is them wanting to know how I got their information, not believing it is a matter of public record, and wanting off my mailing list. One of my most memorable calls was from a Realtor who proceeded to scream at me that it was illegal to send out letters trying to buy her house, that she had been in the business 25 years and that she was going to sue me (obviously she must have been very successful if she thought direct mail was illegal…of course you can never argue with a crazy person…just ask any husband).

I can only think of one time where I was justifiably yelled at when it came to marketing — I got a message from an irate guy with every other word being the F word. Apparently, my bandit sign guy had put my sign up next to a funeral marker on the highway, where someone had recently died (yes, I told my bandit sign guy not to do this again and to use common sense when putting out my signs.)

Well, here is the point…you need to be immune to criticism when it comes to this business. If you are not getting people ticked off at you, then you aren’t sending out enough letters, you aren’t putting out enough signs and you aren’t closing enough deals. Who is going to get yelled at more, the guy who sends out 1,000 letters a month, or the guy who sends out 10,000? Also, please don’t take it personally when you do get yelled at…the person who is yelling at you doesn’t know you from Adam. They are simply yelling at some person who sent them a postcard or a letter.

Also, when you do get yelled at, remember the person probably is having a bad day, or has a crappy marriage, or a crappy home life or they are envious of you (and they just need to vent at someone.) Now, get out there and make sure you are getting criticized more often (yes…that means sending out thousands of pieces of direct mail a month and becoming successful sooner)!

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Tags: direct mail, foreclosure, foreclosure marketing, marketing, NOD, pre-foreclosure, REO

BEWARE! BEWARE! BEWARE!
I am quite sure that many of you are staying abreast of the new laws regarding dealing with sellers and properties on their way into foreclosure status. On my side of the country it is especially critical to follow all guidelines of the pre-foreclosure business. Those who are choosing to take their chance are finding themselves in JAIL. These not so new but recently enforced laws have real estate investors chasing the same agents they kicked to the curb years ago.

In Maryland, we can not make contact with any home seller who is 60 days or later past due on mortgage payments. Only a real estate agent has the authority to make such contact. Now all of the sudden real estate investors in deep negotiations with sellers who are in similar situations must immediately cease fire.

I would jump out and say that 65% or more active investors have some dealings with pre-foreclosure homeowners. On top of that, 100% of real estate investing courses promise to keep students up to speed on the latest laws and regulations surrounding the field but the information is not being taught. Government officials and local newspapers are cracking down hard on these programs and these programs are becoming the blame for transactions gone wrong. There is one case in MD where a homeowner is attempting to sue a real estate investor, the buyer, and the program through which those persons acquired their real estate investing expertise. And it seems as though they have a very strong case when looking at all of the facts.

I have just a few tips to help save you investors some trouble before it comes.

1. When initiating your conversations with sellers, immediately ask whether payments are current. If the payments are not current, kindly request that they sign an authorization to release loan information to your company and its agents to obtain an accurate picture of their mortgage. There are many times when a seller does not disclose that they are behind in payments, being notified by attorneys, are already in foreclosure. Getting the scoop directly from the lender will keep your tail out of jail.
2. Put a QUALIFIED real estate agent on your team. Agents are the only persons who can hold a conversation with a seller regardless of the position they are in. Agents are the most important piece to your pre-foreclosure business. It is called “list it and I will be your first contract on it.”
3. Either get with the new rules or get a GREAT LAWYER! If you continue to operate your pre-foreclosure business in a fashion that ignores the rules, you may find yourself behind bars. “The Foreclosure Consultant” stipulations in the Maryland State Law are very stiff and penalty heavy. Check your local laws to see what applies and what doesn’t.
4. When your real estate direct mail campaigns go out, have your agent return the calls to screen who you can and cannot talk to.
5. If you take a course on real estate investing and someone promises to tell you how to negotiate short sales, ask if they are having a lawyer on site to explain the whats, whens, and hows of the law.

Blessings to your Real Estate Investing Business,

Milton B. Yates

Tags: foreclosure law, law, pre-foreclosure, real estate investing, Real Estate Law

How Valuable is One Lead?

People often ask me what the average response rate is when mail marketing to homeowners in pre-foreclosure. There are two answers depending on what the content of the letter is. If the purpose of the letter is to see if the homeowner is willing to sell, then the average response rate is one half of one percent (.005%). If the letter is offering to allow the homeowner to remain in their house, then the average response rate jumps up between 1% and 4%.

So if 100 letters are sent, you could expect 1 call every other month. The point is, every response is extremely valuable and it is even more important to answer the call and not let it go to voice mail. My opinion is, if they took the time to call you… They will take the time to call the next person in line as well.

What extreme are you willing to take that to in order to get a deal?

I recall a phone call I got on Christmas Eve, 2001. My Fiancee at the time and I were all dressed up and were walking out the door on our way to her mothers house for dinner. She had just stepped outside and I was closing the door when the phone rang. She stopped dead in her tracks, her head swung downward and she said, “Whatever you do… Do not answer that phone.”

I answered it.

A homeowner had received my letter and wanted to see what I was offering. Since it was Christmas Eve, there wasn’t much I could do so, I got their information and we agreed that we would get together the day after Christmas. My Fiancee was relieved.

About halfway to her mothers house I stopped the car and she asked what I was doing. Not remembering my exact words, I said something like this… “That homeowner sounded pretty confused and I would be willing to bet that I am not the only person they called tonight and I guarantee you that no one else will actually go visit with them tonight.” I remember she shook her head and said with her teeth gritted together, “Fine! Let’s go! YOU get to call my mom and tell her why we are going to be late and you owe me BIG TIME for this!” I agreed and turned the car around. I called the homeowner back and told them I was on my way and would be there within an hour.

Was it worth it?

It turned out that they had called four other investors and had made appointments with all of them for the day after Christmas…And I had told them that I would call them on that day. Had I not turned around and met with them when I did, I would have been too late by the time I called on the 26th.

I was able to reinstate their mortgage and they signed a Warranty Deed just a few days after I went to meet with them. Less than 4 months after that I finished the rehab and sold the house. When I got home from the closing, I showed the cashiers check that was for more than $12,000 to my fiancée, I asked her, “Do I still owe you Big Time?”

She looked at the check, gave me a smile and said, “That’s okay, I really didn’t want to go to my mothers house on Christmas Eve anyway.”

I compare real estate investors to Doctors who are On-Call. When a call comes in… Drop what you are doing, take the call and go meet with them right then, if at all possible.

Tags: foreclosure, marketing real estate, pre-foreclosure, preforeclosure, real estate, real estate leads, real estate marketing

Since I got into this business in 1999, my main focus has been on pre-foreclosures. As many investors that have worked in that field know that it is a highly competitive business. The TV infomercials paint a picture that is often times not accurate. TV wants new investors to believe that there are tons of these properties to be had and all you have to do is go to the auctions, bid on them and PRESTO! You have yourself a great investment property!

Is it occupied or abandoned?

When a student of mine seeks my opinion of a prospective house, set to go to the auction, my first question is always the same…. “Is it occupied or abandoned?” What difference does it make? If it is occupied, all that you need to do is evict the previous owner and on you go…Right? Not always.

In the State of Texas, the average percentage of homeowners who are in pre-foreclosure, that have abandoned their homes is 15% (+ or – 2% monthly).
Do the math on this one. If a given County has 1,000 houses posted for foreclosure in a given month, then that means that about 150 of them are abandoned. So if you buy one of those at the auction, you can get started right away since you have full access to the house with the previous owners gone. You can wholesale it, if you like. Maybe you want to rehab it and then sell it? Some look to use it as a rental. The options are all there because there is no eviction needed.

Heed Caution When Considering Occupied Foreclosure Homes

This brings me to the story I would like to share. This is what happened to one of my students, after he bought an occupied house at the auction. The student, Bill, had told me a lot about the house he ended up buying. The problem was, Bill couldn’t give me any information about the interior condition of the house because the owner (before the sale) would not talk to him or let him see the inside. All of his numbers, etc., were nothing but projections to me.

I told Bill to offer the homeowners $1,000 cash if they can be out in a week. $750 if they can move in 2 weeks and $500 if they leave in 3 weeks. Guys, keep in mind, this is TEXAS! We can legally evict someone in about 21 days. If you are in Minnesota or California, it could take more than three months.

The homeowner refused all of his offers. I told Bill to go ahead and evict her.

Two and a half weeks later, he had won his eviction case and now only had to wait for the 5-day appeal period to expire & he expected to have her out in a week.

That is when all Hell broke loose.

Bill called me on the phone and he was frantic. He told me that the previous owner had appealed the case. That was a first for me. In all of my time in the foreclosure business, I had never heard of anyone appealing after the judge had ruled against them. It was pointless…Or so I thought. In Texas, after the judge rules in favor of the investor (or landlord), a tenant has 5 days to appeal it to the County Court…BUT…In order to do that, the tenant is required to post a cash bond. The amount is supposed to be equivalent to two months rent (or two mortgage payments), plus any court costs. In Bills case, the amount was about $3,300.

If any of you reading this don’t see the stupidity of the tenant, let me tell you why it is so unheard of for a tenant to appeal. They CAN’T WIN! No homeowner that has been lost their house to foreclosure, will win. All the appeal will do is delay when they have to move. The previous homeowner had to put up $3,300 for the right to stay in the house for a month or two longer. Once they lose at the County, the $3,300 is gone and they have to move.

The reason Bill was beside himself (in addition to the previous owner appealing) was because they DID NOT HAVE TO POST THE CASH BOND! Bill said that they had filed a “Pauper’s Affidavit” and asked me what it was. I had no idea. I asked around and no one could tell me what it was or why the owner didn’t have to post the cash bond. I finally called a Law Professor at the University of Texas and he said the following:

“Ah yes! The Pauper’s Affidavit! To put it simply, this person was supposed to post the cash bond but, the Pauper’s Affidavit allowed her to side-step it because she has the right to a fair trial. If she can’t afford the bond, then it would seem she wouldn’t get her fair trial.”

Here is the best definition I found for what a Pauper’s Affidavit is:
“A pauper’s affidavit is a sworn statement stating a person does not have sufficient funds to pay court costs for the filing of a new civil case. A judge must enter an order determining poverty.”

When the case reached the County, it was ugly but it was over fast. The County Judge was all over the previous owner. He wanted to know why she thought the outcome would be any different with the County Court? He told her that she lost her case in the JP Court and unless she could tell him one good reason for her appealing her loss, other than just to stall moving out, her quest ended right there!

And so it was over for Bill. Sort of.

Even after going through all that hassle, she refused to move and it took a Writ of Possession to finally put her out of the house. THEN…When Bill went to the house the following day, he discovered the A/C condenser had been stolen. The police found the unit…Two blocks away…In the woman’s PICKUP! Her legal problems continued from that point but, Bill finally had his house!

From the date he bought the house at the auction, until the day he gained legal possession of the property…Just under FOUR months had passed! Let me remind you that he paid cash for the house and having $100,000 sit dormant like it did for that long, really hurt his bottom line. Just to gain entry, was four months! After all that headache and financial burden, Bill came to me and asked, “Hey Jim, what could I have done differently?”

My answer was painfully simple… “Buy an abandoned house, Bill!”

Tags: abandoned, foreclosure, foreclosure-auction, occupied, pre-foreclosure, preforeclosure