Approaching owner before foreclosure auction

18 Replies

Hi everyone!

I’ve found a property within a mile of my current live-in duplex, and have been reading up on the auction process and timeline this past week. I️ want to see if there was a way to make a deal out of this situation and help the owner avoid this event.

What would you say is the best way to approach a homeowner before the foreclosure auction? Has the owner’s credit already been impacted since the auction has a set date? I’m at the point where I️ May try to leave a handwritten note on the door.

What questions do you ask to find out the pain-points? What question gets people to divulge their equity position (especially as they face foreclosure)?

I’m following to see how others answer. Sounds interesting. 

They are likely considerably behind on the mortgage since its going into foreclosure so credit probably won't matter to them. I don't find notes help too much; its best if you can talk to them in person. Maybe propose to help them find  a rental and pay for a few months of rent in exchange and money to boot if there is significant equity. The issue that has always arose for me though is when I get the payoff from the bank the bank has added so many fees and bank interest charges (sometimes more than half that was actually owed on the principle) it didn't make it worth it and the bank would refuse to negotiate so it was better to buy at the foreclosure sale.  If you have more time before the sale you might just get the bank to push it back if you think you can make the deal work. Good luck. 

The foreclosure notice of sale, along with  title search will tell you the equity.  Knock on the door instead of leaving a note.  I am assuming you plan on Buying it, not trying to wholesale it.

keep in mind in most large MSA any one in foreclosure has gotten no less than 50 to 100 letters or post cards offering to help the poor folks out of their situation.

door knock is about the only way to do this.. 

check with your state regarding laws working with those in foreclosure.. in many states there are laws of what you can and cannot do with distressed homeowners.. fines can be severe.

Really great suggestions here. May just have have to knock on that door and fumble through the interaction. Great strategy mentioned by @Jon Johnson on helping the owner find a rental. Did you get in touch with the bank for the paydown after approaching the seller?

@Wayne Brooks , if that’s the case then the title information available via the auction indicates plenty of equity. The plan would be to buy, do a little rehab, and flip the property since a recent sale just went for $415k (100% asking) up the block. The comp has a finished basement, so thats what would have to be added to this property.

I’ll be sure to check in on local laws...don’t want to end up with fines on my first potential deal @Jay (won’t tag for some reason).

Also, how should we handle financing on this? My fiancé argues that the financing should be in place before we even talk to the owner or bank (without knowing paydown, what’s due, what the owner would take), while I’m arguing that we should see if a deal can even be made first, since “money will find the deal”.

@Gregory Flores, Jr.

Yes have them contact the bank while you are there. You may not get another chance so build a friendship for a few minutes and if it looks like they are willing to accept help then find out if they will call on speaker phone while there and request payoff. The bank won't talk to you without their info and speaking to them so you will need their help to get this going. After that you can find out if it will be worth your time to pursue it further.

@Jon Johnson   they usually wont give payoffs on the phone.. but one thing to do is ask for the last mortgage statement this will get you in the ballpark.

but you never know they may have more than one mortgage and other liens.. you really need to run title before you even approach them.. it could be mortgaged to the hilt and a waste of your time. 

Also on the first door knock don't expect a welcoming OH come in and have a cup of coffee and let me tell you all about our personal financial details.. LOL..  remember these people are in a highly stressful situation.. most will not even give you the time of day.

we had a door knock team in my day of doing this.. 3 crews male and female.. needed the female to get in the door.

needed to knock on 100 plus doors a week to talk to maybe 2 or 3 folks and land one if we were lucky.. the chances of you picking  one property and making it work is highly remote frankly.   But you will never know until you try.. 

Just realize what your up against and you need an Authorization for mortgage with you. .so you can get them to sign it and fax it in .. thats how you will get the payoff exact.. if you plan on doing sub too.

Yes Jay is absolutely correct that many people with properties in foreclosure will have judgements and liens that will all need to be searched if you pursue further.

Jay I have had 2 bank statements on deals I tired to work, one showing balance of $61,xxx and another at $99,xxx and after getting payoffs from BOA on the phone those went to $96,xxx and $174,xxx respectively on 2 separate deals. Turns out some of the banks don't put all their additional fees and interest rates and things on the statement they mail to the property owners. Yet the one that was $61,xxx the bank only bid to $50,xxx at the trustee sale even though BOA wouldn't negotiate at all off the $96,xxx number they gave as payoff before so I always feel it's just a gamble as to if you can make a deal with owner or not. Always worth a try.

How reliable is info from Auction.com title reports?

Title info indicates that the mortgage was refinanced in 2015 by a corporate mortgage lender. Could this paper have been sold off somewhere else at this point? I’ve got experience buying bad debt, any thoughts on whether it’d be easier dealing with a servicer over a bank?

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@Gregory Flores, Jr. Forget what Auction.bomb says. Relying upon that is a recipe for disaster. Read the fine print at the bottom of everything they provide. It is for "informational purposes" only.

What does YOUR title report reflect? 

How many open mortgages are there on title? Which is foreclosing? 

Real estate taxes, judgments, other liens, pending lawsuits?

If this is a true foreclosure you aren't "dealing" with anybody other than your own research, other interested bidders, and an auctioneer.

@Gregory Flores, Jr. , in my experience the title reports have been accurate. And in my opinion and experience even if that debt was sold it wouldn't matter for you if you are buying at the auction...as long as they are foreclosing on the 1st mortgage you should ok since you are more or less buying that mortgage as foreclosure. I'm not an attorney so I could always be wrong but in the many deals I've done, I have never had any issue with this except one about 10 years ago and Auction.com caught it and refunded my earnest money. That one was a bit different as it wasn't a trustee sale but an online sale where the bank had already purchased it back at the trustee sale then was selling it. The bank held it for awhile and didn't pay the taxes so it was later sold at a tax sale and that was the issue. So goes back to if you buy at trustee sale always check the taxes before and after and get them current if you do buy it.

Also in just my experience I have never been able to speak to anyone, servicer or bank, without the help of the home owner. The home owner has all rights until its sold and foreclosed. Now if this property is on Auction.com as an online sale then the bank already has title to it and you might be able to somehow work with the bank or servicer although I have never had any luck. Usually they just listed a few times as online sale and then market later with a real estate agent if not sold. 

Colorado foreclosure laws seem crazy:

“The Public Trustee must also mail, at lease twenty-one (21) days before the foreclosure sale, a notice to the borrower describing how to redeem the property.

The owner of the property may stop the foreclosure proceedings by filing an "Intent to Cure" with the Public Trustee's office at least fifteen (15) days prior to the foreclosure sale and then paying the necessary amount to bring the loan current by noon the day before the foreclosure sale is scheduled.

The lender has the option to file a suit for deficiency in Colorado and the borrower has up to seventy five (75) days after the sale to redeem the property by paying the foreclosure sale amount, plus interest.“

http://www.foreclosurelaw.org/Colorado_Foreclosure_Law.htm

Updated 12 months ago

Another correction that Bill S. put me on to. The 75 day redemption period is no longer valid.

Yep every state is different. I would imagine your best bet is to become friends with a title company to get their take on how it goes down there. Sounds like if you buy there just make sure not to do any improvements for 75 days. 

@Gregory Flores, Jr. sorry ,getting caught up on old posts. As discussed in the other thread. The 75 days is no longer correct. If the property sold at the trustees sale they are done. IMO, if you are chasing foreclosures, you need the money lined up first. If you can't deliver you are messing with just more than a broken heart of a seller, you are damaging them financially in a serious manner. 

As for title, you can pull and O&E from a local title company for $5 online and in half a day. It's not title insurance (which you buy at closing for hundreds of dollars) but it gets you up to speed on the property in most cases.

@Bill S.  since I’ve gone back and got the most recent laws, I’m leaning more toward the auctions. I’ll be attending the Arapahoe County auction on 11/29 to see how it goes down. 

@Gregory Flores, Jr. I would recommend if you continue to pursue properties in foreclosure that you get some education from a local title company or attorney. Many title companies offer continuing education for brokers and a few years ago there were many classes regarding the foreclosure process. Not so much now but I'm sure there is one if you search.

If you don't know what you are doing you can get hurt at the auction. Search some old threads here that discuss the process. Just watching the auction and researching the properties after the fact is very informative. The last auction I attended about 2 years ago in Jefferson County, the one property that sold at auction, sold for market value as best as I could determine.

Let us know how things go after you watch the process in person. 

@Bill S. I was able to pull an O&E. Just have a HOA lien from February 2017 to look into. I know there are some laws around HOA lien treatment, so that's the next thing to nail down.

All this is helping to build up my system for foreclosure buying, and possibly look into REOs. I am leaning this way given my experience in distressed debt investing, so I appreciate everyone's continued feedback.

A recent property in my backyard sold out of REO for $220k in May, and sold on the market this month for $385k.

I agree with @Jay Hinrichs that it is very important to know the laws when offering to "help" people in foreclosure.  In Utah, for example, you can not tell people you can stop foreclosure and offer solutions if you are not licensed.  Non licensed people can only offer to buy the house or get an appointment for a licensed person.  I also agree that door knocking is the best way to reach these people, and I also think that you need to be there to offer them all of  the possible solutions including modification and bankruptcy if they can and want to keep their house.  This first question we ask people in foreclosure when we meet them is "do you want to keep your house or sell your house".   The answer dictates how the conversation goes.  

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