I am thinking about going "door knocking" to a pre-foreclosure

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I am thinking about going "door knocking" to a pre-foreclosure

Joe Ellis
Fort Worth, TX · Member since 2015 · 121 posts · 28 votes

I'm looking to move further west (I live in North Las Vegas currently) and I was doing some digging and found myself in the "pre-foreclosure" area of one of the websites. I found a house that looks nice from the outside (Google Mapped it and the neighborhood, yes I know those are outdated) and I was thinking about driving over to the house right now and knocking on the guy's door and just asking him if I could help him prevent foreclosure by essentially buying his house from him. I don't have access to financing so I would have to have him owner finance, but instead of just giving my money to this guy and trusting that he'll pay the bank I will just get in contact with the bank and pay them myself. Does anyone know if this will work? Thank you all for your advice! 

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Daniel Watrous
North Stonington, CT · Member since 2013 · 35 posts · 10 votes
10y

It all depends on how much he owes and how much cash you have and where they are in the process of foreclosure. Owner financing isn't really an option with a pre-foreclosure unless you can bring enough money to catch up the payments or pay off the mortgage. There may be more than one lender and even the 2nd mortgage can foreclose. Also because they've stopped paying their mortgage they probably have back taxes and other liens as well. Maybe save your capital and look up an auction instead.

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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    Here's how I'd approach it...

    See, you started out well in your post when you talked about looking to move further west. So, instead of putting the owner on the defensive by tipping your hand right away about being aware of their status, if they answer the door(!!!), tell them you're looking for a home in the area and do they know if any are for sale or might consider selling.

    Now, instead of an opponent, you've found a friend!

    2Reply
  • Daniel Watrous
    North Stonington, CT · Member since 2013 · 35 posts · 10 votes
    10y

    It all depends on how much he owes and how much cash you have and where they are in the process of foreclosure. Owner financing isn't really an option with a pre-foreclosure unless you can bring enough money to catch up the payments or pay off the mortgage. There may be more than one lender and even the 2nd mortgage can foreclose. Also because they've stopped paying their mortgage they probably have back taxes and other liens as well. Maybe save your capital and look up an auction instead.

    3Reply
  • Christopher Brainard
    Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
    10y

    I agree with @Daniel Watrous. If you lookup the house at the county recorder, you can see when the house was sold and for how much and when the notice of default was sent. That should give you a rough idea of how much they may be behind in payments. If you have the capital to clear all the back payments, taxes, and liens on the property, this type of strategy may work. With that said, I'm not sure I would want to be the one knocking on a home headed into foreclosure. I've dealt with several per-foreclosures in the past and the emotional state of the occupants is often (understandably) volatile.

    -Christopher

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    Thank you @Daniel Watrous The reason I've been looking into this is because I have less than $5K to spend. I'm currently in the process of changing jobs to a commission based job (hence why I can't obtain conventional financing). I looked into the county records and found no 2nd mortgage. I was thinking that more than likely there isn't more than $3K to get the mortgage back to normal. 

    @David Dachtera that is fantastic advice! I hadn't thought of that. More than likely if I do go I'll use this. Thank you! 

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    @Christopher Brainard, your comment came through as I was writing my last one, sorry. But yeah like I said the county records indicate that there was a large amount of appreciation between the date that it was sold (2009) and now, so I'm thinking that the guy lost his job or something and just couldn't handle the bills. I'm going to do this and I'll update you all when I get back home.  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joe Ellis  probably waste of time I bet they owe far more than 5k to bring it current

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    Sure enough @Jay Hinrichs, you're correct. He said he's not selling and doesn't know of anyone in the area either. That sucks. Oh well. I stopped and talked to a few of the other neighbors and no one knows anyone it seems. Kinda strange to me. I'll definitely keep my eyes peeled out here though. 

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  • William Hochstedler
    Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    @Joe Ellis

    Do a little kicking around here on BP.  There are lots of strategies that people use when door knocking.  Here is a good thread.

    I'm much more up front with why I'm knocking on their doors.  And I go back.

    The strategy is to get them talking.  This way you can build rapport and start thinking about how you might be able to help them.

    I haven't seen very many defaulted loans that can be reinstated with $5K, but there may be a wholesaling opportunity for you if there's an interesting deal.

    Stick with it and good luck.

    1Reply
  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y
    Originally posted by @William Hochstedler:

    @Joe Ellis

    Do a little kicking around here on BP.  There are lots of strategies that people use when door knocking.  Here is a good thread.

    I'm much more up front with why I'm knocking on their doors.  And I go back.

    The strategy is to get them talking.  This way you can build rapport and start thinking about how you might be able to help them.

    I haven't seen very many defaulted loans that can be reinstated with $5K, but there may be a wholesaling opportunity for you if there's an interesting deal.

    Stick with it and good luck.

     I never thought of wholesaling it, just because my end goal is to live in the houses that I'm knocking, but I guess if the sales price was right I wouldn't be opposed to the idea. Thanks for the insight! 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joe Ellis like any kind of distressed RE you probably have to knock on 50 doors to land one deal. I used to have a team in PDX 3 sets of 2 we knocked every single NOD in 4 counties it was a full time job and that amounted to 2 to 3 deals a month. So for you to try to pick out one your going to live in.. pretty tough odds

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    @Jay Hinrichs, that's a good point. Although, if me knocking on 50 or even 100 doors resulted in me stumbling across a home that was in good enough condition for myself and my wife to live in and have good equity, enough so that the seller would be willing to sell $10k+ below market value I think that's well used time! I am still a novice so my time isn't worth nearly as much as what you or other experts time is money wise. Thank you for sticking around on BP and teaching and spreading your knowledge. That goes for you and everyone who does so. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joe Ellis  Ok then good luck at least it will give you practice I would say 80 to 90% of investors or just plain people are not comfortable cold calling.

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    That tells me that I only have 10% competition, haha. 

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  • Raun Stout
    Real Estate Agent · Tucson, AZ · Member since 2015 · 7 posts · 3 votes
    10y

    Cold calling and door knocking is one of the great untapped areas for potential, specifically because it does make so many people uncomfortable. So as a strategy I highly recommend it....just be prepared for a lot of 'no's to get that 'yes.'

    Also I agree with the other members: He probably owes a lot more than 3k unless he has a a home that he bought for a low dollar amount or he put down a significant down payment.

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    Okay sorry if this is a newbie question then but please bear with me. 

    Let's say his mortgage is $800/mo. Every mortgage payment that I've seen, the monthly mortgage payment includes PITI. So even if he's 6 months behind that's only $4800. That's my thinking, but if any of you could shed some light on why you're saying that it's going to cost more than $5k please elaborate? @Jay Hinrichs, @Raun Stout, @William Hochstedler

    Thanks. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joe Ellis  add pentalites   default interest rates if applicable. and foreclosure costs

    about as low as I have ever seen one on the West coast  is 8k or so.

    And remember many times the people could be a year or more in arrears before the NOD is filed

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    Oh wow. I didn't realize they waited so long before the home started the foreclosure process. I was under the impression that it was kinda the same as an eviction, but 3 months of missed payments instead of 5 days late was the trigger. And I didn't even think of penalties and foreclosure costs needing to be paid. Thank you for enlightening me! I appreciate it. 

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  • John HornerPro Member
    Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
    10y

    I think you would have to knock on A LOT of doors to get a deal this way.  I have marketed to pre-foreclosures in the pasts and learned a few things.

    1.  Most of them don't have much equity, especially enough for you to profit from, or they would of or could have sold a long time ago.

    2.  Even the deals I have worked on that had equity could not help themselves enough to get out of a deal.  Either they don't understand and still want a stack of cash out of a low equity deal or just to stubborn to give anything away.

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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Joe Ellis,

    PITI payments are usually when the home is purchased with less than 20% equity (down payment). Otherwise, the lender will likely take their P&I and "trust" you to pay your taxes and keep up the home-owner's insurance you agreed to carry when you signed papers at closing.

    Mind you, I haven't purchased a primary residence since before the crash. So, that may have changed.

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    @John Horner, yes I could definitely see someone trying to get the most out of their house, that's understandable. I think our job is to help them understand that we're there to prevent them from going all the way to foreclosure and ruining their credit completely. And I think that you're probably correct in saying I'd have to knock a lot of doors. That's fine with me, my time isn't really as valuable as some of you other guys which is why I thank you all for spending that time teaching others here on BP. 

    @David Dachtera, oh wow I hadn't thought of that, that would make sense! 

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  • Eyan Lakhani
    Wholesaler · San Antonio, TX · Member since 2016 · 49 posts · 6 votes
    10y

    Hey @Joe Ellis 

    How did you door knocking campaign go after all ? Any deals ?

    Whats the progres on your RE business ?

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  • Joe Ellis
    OP
    Fort Worth, TX · Member since 2015 · 121 posts · 28 votes
    10y

    Hey Eyan, so I ended up knocking on his door along with a few others and noone knew of any trying to sell their homes in that area. I ended up trying to get pre-approved through a bank and apparently I have bad credit so that isn't an option (for now). I ended up getting my Real Estate licens and became a REALTOR here in Las Vegas and now I'm doing this full time whil saving up money so that I can put myself on the path to owning rentals but saving cash is the hard part. 

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