Pre-Foreclosure Marketing Question
Wholesaler · Magna, UT · Member since 2013 · 9 posts · 1 vote
What are your recommendations for pre-foreclosure direct mail pieces? Yellow Letters or Post Cards.
Good points Gary, there are a lot of restrictions, just make sure you understand them and work within the the guidelines. We personally don't do Subject To's unless we have the ability to completely pay off the loan to the bank because its a possibility that could happen, but mainly because even though its legal to do Subject To's, where we are anyways, they really give the impression of a scam, especially if something goes sideways in the deal.
Hi Mark,
We do something very similar for preforeclosures. We don't just blanket direct mail. We "pre-qualify" houses first to narrow the list, reduces cost and time wasted on property that you can't really do anything with. Then, even though its a little more work, we tape our "mailing" to the front door instead of using the mailbox. Our response rate has been in the 15-25% range. But people move slow and take time to chew on things. Don't expect an immediate response, give it a week. By doing it this way, if someone is calling in regards to one of our mailing, we are 90% sure we can help them and we already have some basic info on file about their house so we seem like we are more professional and serious. Put yourself in their position, whether its their fault is irrelevant, in their opinion they are running out of options and are "hyper" sensitive. If the numbers work, from that point on worry less about making lots of money and more about how to reduce their stress and find a creative solution. I've had several people tell me in the past that they've had "sharks" offer them lowball offers on their property. At that stage their dignity is about all they have left. People work more with us because we care, not because we are taking advantage of their situation.
Sorry for the long response. But like most of the experienced investors will tell you, this is a problem solving and a high people contact business. If you don't feel comfortable working with highly stressed people and making them feel comfortable enough to trust you to help them, then there are other ways to handle real estate that require less human contact.
Btw, I put peanuts in my envelope along with a postcard they can put on their fridge that says "you'd be nuts not to let us help" on one side and our information on the other. The nuts are a gimmick but it entices them to open the envelope because they wonder what the heck it is. Getting the homeowner to look at your contact is the biggest step. Think outside the box. Break them out of their funk and maybe even put a smile on their face. It could be the difference between a call or not. Hope this helps.
Oh and to add I will be knocking on a few doors of properties I feel have more potential.
How about a more business type letter? White paper and white envelope. I dont market to this group yet, so I have not tested anything. The thing is, is that different people respond differently to different media. I do think PC are better suited for large lists that can be touched time and time again, and typically hitting pre-foreclosures is a shorter marketing time table because of the looming sale.
I did this for two years. It is a great way to get experience talking with people. What determines "more potential" for you?
My concern with pre-foreclosure is that these homeowners typically do not have sufficient equity. Otherwise, they would have sold their home to cash out, pay off the mortgage, and avoid foreclosure.
Back in '07 and '08 we used to market to these prospects, plus short sales etc., because that's all there was. These days we don't waste marketing dollars on prospects that don't have 50%+ equity.
Now, as I have not been doing this strategy, I'm not an expert in this strategy. I'm just concerned that you may put a lot of effort in this just to find that all you get is calls from sad people in a screwed situation that, unfortunately, do not result in an opportunity for you.
Would love to hear from any others. Perhaps I am overlooking something!
The "potential" I am looking at is based on Equity. When I get my list of pre-foreclosure, I look at those that have had the loan the longest and how much it was for. Those that interest me I am going to check for any liens and how much I think it is worth. Those that seem like it could be a good deal without a short sale, I will knock on their door.
I may be able to get some properties by taking over payments and getting them caught up,(depending on how behind they are). Then use lease options or another strategy to get that payment caught up using option fees or down payments. I will have the tenant-buyer on the lease option work on getting their own loan in a few years and once they do, the loan is paid off.
The following is under Title 61 Chapter 2f Section 401 of the Utah Code. Be very careful discussing "foreclosure help" if you intend to take the property subject too the mortgage. I use to do exactly what you intend to do, knock doors of preforeclosures with equity with the intent to buy sub2. This was before I was licensed; however, there is language elsewhere in the code that states, paraphrasing, that not being licensed does not excuse you from breaking these laws. These are laws not administrative rules. Pay attention to (21) (b) and (d) i & ii.
(21) (a) engaging in an act of loan modification assistance that requires licensure as a mortgage officer under Chapter 2c, Utah Residential Mortgage Practices and Licensing Act, without being licensed under that chapter;
(b) engaging in an act of foreclosure rescue without entering into a written agreement specifying what one or more acts of foreclosure rescue will be completed;
(c) inducing a person who is at risk of foreclosure to hire the licensee to engage in an act of foreclosure rescue by:
(i) suggesting to the person that the licensee has a special relationship with the person's lender or loan servicer; or
(ii) falsely representing or advertising that the licensee is acting on behalf of:
(A) a government agency;
(B) the person's lender or loan servicer; or
(C) a nonprofit or charitable institution; or
(d) recommending or participating in a foreclosure rescue that requires a person to:
(i) transfer title to real estate to the licensee or to a third-party with whom the licensee has a business relationship or financial interest;
(ii) make a mortgage payment to a person other than the person's loan servicer; or
(iii) refrain from contacting the person's:
(A) lender;
(B) loan servicer;
(C) attorney;
(D) credit counselor; or
(E) housing counselor.
Good points Gary, there are a lot of restrictions, just make sure you understand them and work within the the guidelines. We personally don't do Subject To's unless we have the ability to completely pay off the loan to the bank because its a possibility that could happen, but mainly because even though its legal to do Subject To's, where we are anyways, they really give the impression of a scam, especially if something goes sideways in the deal.
Hi Mark,
We do something very similar for preforeclosures. We don't just blanket direct mail. We "pre-qualify" houses first to narrow the list, reduces cost and time wasted on property that you can't really do anything with. Then, even though its a little more work, we tape our "mailing" to the front door instead of using the mailbox. Our response rate has been in the 15-25% range. But people move slow and take time to chew on things. Don't expect an immediate response, give it a week. By doing it this way, if someone is calling in regards to one of our mailing, we are 90% sure we can help them and we already have some basic info on file about their house so we seem like we are more professional and serious. Put yourself in their position, whether its their fault is irrelevant, in their opinion they are running out of options and are "hyper" sensitive. If the numbers work, from that point on worry less about making lots of money and more about how to reduce their stress and find a creative solution. I've had several people tell me in the past that they've had "sharks" offer them lowball offers on their property. At that stage their dignity is about all they have left. People work more with us because we care, not because we are taking advantage of their situation.
Sorry for the long response. But like most of the experienced investors will tell you, this is a problem solving and a high people contact business. If you don't feel comfortable working with highly stressed people and making them feel comfortable enough to trust you to help them, then there are other ways to handle real estate that require less human contact.
Btw, I put peanuts in my envelope along with a postcard they can put on their fridge that says "you'd be nuts not to let us help" on one side and our information on the other. The nuts are a gimmick but it entices them to open the envelope because they wonder what the heck it is. Getting the homeowner to look at your contact is the biggest step. Think outside the box. Break them out of their funk and maybe even put a smile on their face. It could be the difference between a call or not. Hope this helps.
Gary,
That is great information thank you. I have been looking at the laws and trying to make sense of them. Any assistance I give them I will not charge for. I may recommend loan modification but not do it for them and definitely not charge them to do it.
Roy,
Great info as well. Thank you. I don't want to just mail all the pre-foreclosures that I get. I want to knock on the doors of the ones that meet certain criteria and then mail to others that may be close. Those that I know right away are not a good deal I will not do anything with. I feel like I can work with them. I understand what they are going through because I was in a similar situation 10 years ago. I ended up in a short sale so I saved the foreclosure but it was stressful. If I knew then what I know now about investing, things would have been different.
You mentioned other ways. What other ways do you recommend?
....I put peanuts in my envelope along with a postcard they can put on their fridge that says "you'd be nuts not to let us help" on one side and our information on the other. The nuts are a gimmick but it entices them to open the envelope because they wonder what the heck it is. Getting the homeowner to look at your contact is the biggest step. ......
Wow, Peanuts, bulging envelope, "What the hell is in that envelope???"
@Dev Horn
How come only 50% equity and above? Wouldn't you want to market to this list for possible short sales?