My new idea for finding motivated sellers

11 Replies

I just had this idea for finding motivated sellers in the very difficult, competitive market I am in. The city has a lis penden list as part of their public records, with a new 50 or so listings added daily.

My plan is to comb through the lists and find addresses of interest, compile a shortlist and then do a drive around to those properties. Understandably it's not always easy to find the actual owner and that might require some extra work.

Example 1, I just found a property in a location I like. Property appraiser website shows me it sold in 2010 for $85,000. My current valuation of the property is around $180,000. Let's hypothesize the owner made the bare minimum mortgage repayments and then accumulated fees and interest and that mortgage is in the vicinity of $80,000. I might offer $130,000 which pays off the mortgage and gives the owner cash to walk away with, without ever having a foreclosure on their record. 

This is just an idea I had today, so if there are major problems with it, I'd appreciate people telling me.

At present, I currently do 3-5 hours of Driving for Dollars per day (driving and research included) and I'm not yet sure if the time invested is worth the return!

Hi Nat,

Disclaimer: I am unfamiliar with real estate law in your state, however it looks to me that there is some similarity with the list I pull here in Colorado that shows me who is defaulting on their loans.

Here is your major problem… the info you are pulling, almost positively, only shows the first mortgage. Meaning that the property owner may owe considerably more on the property than what was originally paid IE second mortgage, personal loan secured by the property etc. The property may also have liens against it and the owner may have judgments that would encumber the property.

The technique you allude to is not unheard of, not sure how common it is. You could track down the owners using public records through the Public Trustee or Tax assessor (not sure if you have property taxes where you are) and write or send a post card expressing interest in buying the property.

You could also pull an Owner and Encumbrances (O and E) report from a title company that would give the owners name and what liens and mortgages they have on the property (Two birds, one stone) however this would get expensive. Here in Colorado its $5 a report, I understand in NJ its $100 a report. Even at $5 it can get expensive. I pull about 4 or 5 O and Es a week on properties that look promising, so it doesn’t break the bank.

I use the list and O and Es to find and qualify pre foreclosure properties that will go to the Trustee Auction (not to be confused with auction websites like HUBZU etc.) I have bought two properties at auction this year using this method.

Good luck

This post has been removed.

have you guys tried offering to purchase the equity position from the owner in default and tried to work out a deal with the bank thru the loss litigator of the bank to assume the loan after reinstating it?

Mike Sedlacek, Real Estate Agent in VA (#0225223133)
(757) 405-7336

Hi Nat.  

Yes, a common strategy and one I've been doing for awhile.  I think it's just the natural thing that happens in an investors brain at a certain point of their house hunting.  There are a few places to make things easier for you when looking to make these offers to Foreclosures.  First try RealtyTrac. http://www.realtytrac.com/  They can sell you pre-forclosure lists that make sense for your model.  Their not expensive when your talking a short list like you are.

Second, I want to make sure you are doing your evaluation correctly.  Bigger Pockets has calculators for pro members.  Here's the one for Flipping.  http://www.biggerpockets.com/flip-analysis Make sure you account for Realtor Fees, Closing costs, Taxes, Insurance, Utilities, and rehab costs.

I'm in Denver so you'll have to check the expenses in Miami but if your example house above was in Denver, your 180k example will have roughly 18k in closing costs per traditional realtors and title companies and 2k in insurance and utilities depending on the length of the rehab.  If you offer 130k, that leaves you with roughly 32,000 to remodel and yield a profit.  Make sure to get strong contractor quotes and don't  guess.  The 32k will go fast!

Hope this helps!

-Scott Jensen

(720) 663-7825
Originally posted by @Marcello D.:

Hi Nat,

Disclaimer: I am unfamiliar with real estate law in your state, however it looks to me that there is some similarity with the list I pull here in Colorado that shows me who is defaulting on their loans.

Here is your major problem… the info you are pulling, almost positively, only shows the first mortgage. Meaning that the property owner may owe considerably more on the property than what was originally paid IE second mortgage, personal loan secured by the property etc. The property may also have liens against it and the owner may have judgments that would encumber the property.

The technique you allude to is not unheard of, not sure how common it is. You could track down the owners using public records through the Public Trustee or Tax assessor (not sure if you have property taxes where you are) and write or send a post card expressing interest in buying the property.

You could also pull an Owner and Encumbrances (O and E) report from a title company that would give the owners name and what liens and mortgages they have on the property (Two birds, one stone) however this would get expensive. Here in Colorado its $5 a report, I understand in NJ its $100 a report. Even at $5 it can get expensive. I pull about 4 or 5 O and Es a week on properties that look promising, so it doesn’t break the bank.

I use the list and O and Es to find and qualify pre foreclosure properties that will go to the Trustee Auction (not to be confused with auction websites like HUBZU etc.) I have bought two properties at auction this year using this method.

Good luck

 Thanks for the info.

I am aware of possibility of second mortgages and liens. I certainly wasn't planning to buy anything without a title search and title insurance.

I don't send postcards or letters unless owner is interstate. Who knows if that letter will ever reach the owner? If you want a property, you need to track the owner down in person.

Originally posted by @Scott Jensen :

Hi Nat.  

Yes, a common strategy and one I've been doing for awhile.  I think it's just the natural thing that happens in an investors brain at a certain point of their house hunting.  There are a few places to make things easier for you when looking to make these offers to Foreclosures.  First try RealtyTrac. http://www.realtytrac.com/  They can sell you pre-forclosure lists that make sense for your model.  Their not expensive when your talking a short list like you are.

Second, I want to make sure you are doing your evaluation correctly.  Bigger Pockets has calculators for pro members.  Here's the one for Flipping.  http://www.biggerpockets.com/flip-analysis Make sure you account for Realtor Fees, Closing costs, Taxes, Insurance, Utilities, and rehab costs.

I'm in Denver so you'll have to check the expenses in Miami but if your example house above was in Denver, your 180k example will have roughly 18k in closing costs per traditional realtors and title companies and 2k in insurance and utilities depending on the length of the rehab.  If you offer 130k, that leaves you with roughly 32,000 to remodel and yield a profit.  Make sure to get strong contractor quotes and don't  guess.  The 32k will go fast!

Hope this helps!

-Scott Jensen

 Scott, I'm so embarrassed for claiming I had a new great idea when it's already a common practice! Have you had much success with this method?

Isn't realtytrac going to sell me the exact same information I'm getting for free from the courts public records?

I'm fine with evaluating deals and the example I gave was something quick I made up.

Also there was never any mention of flipping anything. Flipping isn't my focus at the moment.

I'd love to hear more about what you're doing.

@Nat Chan Yes a common source for investors and perhaps more so agents. Finding ones with equity is the hard part.  You can buy the lists also from Daily Business Review, and other sources.  Of course it's worth a few minutes to look on the county Official Records search for other mortgages/liens before driving out.  Also, from pursing short sale leads, in the early stages just a after an LP,  I've found owners are either in denial, hope for a miracle, figure they have a couple of free years, think the Obama train will save them, etc. and just don't seem to be motivated yet.

I believe your question to your post has to do with finding motivated sellers @Nat Chan ? Honestly, 99% of my deals come from direct mail. That is it! Nothing fancy, but I do what works. This is the old fashioned way and has a lot of competition, but I find that it is harder to do than picking up a newspaper. You see, it is my opinion that the harder you look to find deals- the less competition you will find trying to get the same deals. 

You may also think about expired listings? This is something my mentor and managing broker does to find deals. I actually bought an expired listing by shear luck just 4 months ago. It just so happened that the seller tried to list her property and it did not sell. Another way is to go to HUDhomestore to find deals. These have a lot of competition but once you register you can start bidding on deals fast! 

I think for me Nat is that we just don't give up. I have come so close to getting a deal and then it does not go through and I feel like giving up. Then, right when I am thinking about giving up - that is when amazing deals are right around the corner. Dedication+Determination= A Deal.  LOL! 

Stephen Barton, Real Estate Agent in IN (#RB14052302)
317-694-4774
Originally posted by @Wayne Brooks :

@Nat Chan Yes a common source for investors and perhaps more so agents. Finding ones with equity is the hard part.  You can buy the lists also from Daily Business Review, and other sources.  Of course it's worth a few minutes to look on the county Official Records search for other mortgages/liens before driving out.  Also, from pursing short sale leads, in the early stages just a after an LP,  I've found owners are either in denial, hope for a miracle, figure they have a couple of free years, think the Obama train will save them, etc. and just don't seem to be motivated yet.

 Wayne, every single word of advice from you is always gold. This statement was so funny "I've found owners are either in denial, hope for a miracle, figure they have a couple of free years, think the Obama train will save them, etc."

Yes before I drive far, I always cross check the court records to see what else I can find, like debts and mortgages.  I have been doing this with my Driving for Dollars expeditions. It's amazing the amount of information you can gather about a person. I was having trouble locating an owner whose mailing address was listed as the abandoned property. I found a domestic violence arrest record which listed an alternative address and voila that was how I finally found the guy.

@Nat Chan I started marketing to owners in default in 1978. The guy who taught me had been doing it for years. My Godfather told me about the technique before that, as I had never really seen him work a regular job (like my Dad).

Here's my logic:

If you visualize a timeline, 80% of people in foreclosure belief the problem can be solved or that somehow it will go away. The other 20% are problems that are more serious and the foreclosure is only symptomatic of bigger problems (drugs and alcohol, marital, incarceration, dementia, mental illness and death).

As to contacting principals, marketing means the way(s) we reach people. Sales is how we convert a prospect to take action and complete a transaction. Advertising is salesmanship multiplied by reaching more people via targeted direct mail, or other media whether online or offline. 

If I had unlimited time, budget, energy (and patience) I could door knock every house. Of course, that's not practical. Real estate people often try to do this with a 'farm' strategy. 

The challenge with doorknocking is that it's literally hit-and-miss as to reaching people. My solution has been to send a series targeted letters to high equity, high-shot leads, in sequence with each letter having a single theme and unique selling proposition.

This can be followed up with a phone call inquiring if my letter was received and if I can be of further help. 

A certain percentage of letters are returned by USPS as undeliverable. These 'nixies' are valuable and may be worth extensive research and skip tracing target principals.

With a best-of-best list that I've applied 80/20 principal to potential, I create a short list to door knock. These will typically require multiple attempts so my list is kept small. Also, time must be budgeted to speak to neighbors, couriers, workers and utility folks who may provide further insight into a skipped targets whereabouts. 

I suggest you distill your list down to a very manageable five (5) or six (6) because you can drill deeper with a small list. 

Originally posted by @Rick H. :

@Nat Chan I started marketing to owners in default in 1978. The guy who taught me had been doing it for years. My Godfather told me about the technique before that, as I had never really seen him work a regular job (like my Dad).

Here's my logic:

If you visualize a timeline, 80% of people in foreclosure belief the problem can be solved or that somehow it will go away. The other 20% are problems that are more serious and the foreclosure is only symptomatic of bigger problems (drugs and alcohol, marital, incarceration, dementia, mental illness and death).

As to contacting principals, marketing means the way(s) we reach people. Sales is how we convert a prospect to take action and complete a transaction. Advertising is salesmanship multiplied by reaching more people via targeted direct mail, or other media whether online or offline. 

If I had unlimited time, budget, energy (and patience) I could door knock every house. Of course, that's not practical. Real estate people often try to do this with a 'farm' strategy. 

The challenge with doorknocking is that it's literally hit-and-miss as to reaching people. My solution has been to send a series targeted letters to high equity, high-shot leads, in sequence with each letter having a single theme and unique selling proposition.

This can be followed up with a phone call inquiring if my letter was received and if I can be of further help. 

A certain percentage of letters are returned by USPS as undeliverable. These 'nixies' are valuable and may be worth extensive research and skip tracing target principals.

With a best-of-best list that I've applied 80/20 principal to potential, I create a short list to door knock. These will typically require multiple attempts so my list is kept small. Also, time must be budgeted to speak to neighbors, couriers, workers and utility folks who may provide further insight into a skipped targets whereabouts. 

I suggest you distill your list down to a very manageable five (5) or six (6) because you can drill deeper with a small list. 

Thank you for your pearls of wisdom Rick. Your advise is correct. The properties I have door knocked so far have all been ones of high value which I did extensive research into beforehand. 

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