Pre-Foreclosure Q's

11 Replies

Hello BP, I have recently started my venture in wholesaling, and plan to work my way up to eventually owning and renting out apartment complexes/vacation condos, etc... But for now, I'm 20 years old, broke, and have quit my 60-65 hr a week job. Ok so first off, today, I started to try to market to people who are currently in the "pre-foreclosure" process. I am using Zillow to find these listings, but it seems like the "Pre foreclosures" listed on Zillow may be out of date. Most of the homes I approached today (yes, I'm door knocking, and yes I know it's dangerous, desperate, etc etc...) were either weatherized or completely gutted and obviously already foreclosed upon or bought. Does anyone else have experience with using Zillow for pre foreclosure listings? Are there any alternatives as far as free (or very cheap) Pre foreclosure listings? Also, I want to know if there any successful wholesalers out there who have experience door knocking and can provide any tips? I know it's a long read and I'm asking a lot but any input would be greatly appreciated. I'm in Walton/Gwinnett counties, Ga if that matters to anyone. Anyways, thanks for reading. Cheers.

Thank you so much. I really appreciate it.

Trevor Jackson door knocking is great. No one else does it and if you are only doing it to pre foreclosure you are narrowing down your criteria. Zillow is terrible. Listsource is a great place to find foreclosure leads. Also look in the newspaper they are in there every week

Hey Trevor, 

A few things. 

1) Door knocking is dangerous. Especially going to homes where people are facing foreclosure. And very time consuming. 

2) Working foreclosure properties (either short sale, auction, etc) you'll need someone to guide you, because it's a little more involved than, say, properties with equity.

I've been there, where I didn't want to work for other people even if I was struggling running my own business. But worrying about finances while trying to learn a new venture (and real estate is not something you'll learn to do correctly, profitably over night) is not the type of life you want either, and because working pre-foreclosure is not the easiest to do without guidance, my suggestion is that you can still find a job where it doesn't require you to work 65 hours/week, use the money you'll be making from a job to do mail/post card campaigns so you're only talking to people who want to talk to you. 

I suggest doing yellow letters for people with equity, and doing post cards for people who are in foreclosure. You can also do bandit signs, but make sure you check your local town/city regarding putting up bandit signs. Read BP forums, and listen to several podcasts on iTunes and get a basic gist of which direction you want to start off with in real estate. You learn to do it right, and profitably, believe me, you'll never have to have a job. 

Johnny  

Thanks Johnny and Devan. And I probably should've mentioned in the original post that I have been actively engaged in lead acquisition for about 4 months now with no luck so far from my yellow letters and Adwords campaign. I've been on a few appointments and just haven't been able to make anything work for various reasons. That's why I'm moving on to door pre foreclosure knocking as my main "acquisition" activity for now, all I need is one deal from that, and I can scale my marketing way up. But I will continue the mail in the mean time. I must say I certainly appreciate the input and it is duely noted. It's good to know that there's people out there with intent to help. Thanks guys. 

I like that other investors believe that door knocking is "dangerous and desperate."  It eliminates a lot of competition.  Nothing beats face to face discussions. You may have to go back several times maybe with a different flyer or newsletter to gain their confidence.

Obviously don't go to war zone neighborhoods.  It does take effort, all lead sources do.  My goal, and that of two other investors I know here is to door knock a minimum of 15 doors a day, at least three days a week, including neighbors to learn when the owner is home.  If not at home, have a brochure or flyer, in an envelope, to leave attached to the door with masking tape. 

As to yellow letters, IMO their time has long passed.  I've been in homes where the owner had well over 50 yellow letters all saying essentially the same thing - I want to buy your house.  How would you respond to junk mail, which is essentially what a yellow letter has become?

I agree that Zillow is very inefficient and not worth much.  For a list of foreclosures ( pre and auctions) Realty Trac is good.  It's a subscription service but IMO very reasonable.  Also, in Georgia there is an (again, IMO,) excellent teacher, Tony Youngs who specializes in teaching about the Hidden Market - foreclosures, bankruptcy, buying junior liens, etc. 

Another point that most new investors don't realize is that any marketing, direct mail, door knocking, phone calling, etc. always has and always will have a very low response rate  the first time.  Maybe a half percent.  Teachers of direct mailing all say that real success comes after 8 - 11 contacts.  I mail 500 letters a month and I know investors who mail 1,000 a month, and one mails 5,000 a month.  And response rate is irrelevant, it's conversion rate that gets you the house.

To clarify, I'm not saying don't do door knocking just because it's "dangerous/desperate." I'm speaking more from the aspect of thinking about what your time & effort is worth. 

Of course you can drive around, door knocking 15 houses/day, but there are several factors you'll want to consider. 

1) Yes, nothing beats face to face discussion; but if that fact to face encounter is not welcomed, it's not a great encounter. It's similar to cold-calling. Does it work? Yes. Is it the most efficient, and effective way to get customers? No. When I was in finance, my first few years were spent cold-calling for clients to invest with me. Remember "Boiler Room" the movie? I was that guy, except all the cursing, etc. Making 100s of calls everyday. It wasn't the most effective, nor fun. Then I learned how to get referrals, where people were calling me. There are basically 2 ways to set up your marketing in business. Out-bound and In-bound. In-bound is much easier, more profitable, and less time consuming. And I've done door knocking (both when I was in finance and when I got started in real estate), so it's not like I've never done it, and advising people not to do it when I have no idea what I'm talking about. 

You can listen to Sean Terry's story on his podcast "Flip to Freedom" on iTunes on how he got started in the wholesaling business; door knocking on pre-foreclosure list, and if he still does it. (short answer: no) Yes he did get started with it, but he gets in to several reasons why you should consider otherwise, especially now with all this technology and resources, you can really leverage your time/money/energy and get the most out from what you've put in.      

2) Georgia is a non-judicial state, meaning the foreclosure process is much shorter than judicial states. By now, a lot of the pre-foreclosures/foreclosures have been "cleaned" up so the amount of properties that are still in that phase is much less than it used to be, say between 2009-2012. Plus, homes are more spread out, than areas like NYC, which means if you're going to 15 homes/day, you're spending anywhere between 1.5-2 hours/day driving around, talking to people, who some times say they're not the owners, when if fact they are and they just lie to you. So even if you talked to their neighbor about the owner of a certain property, and they tell you "yeah, he's the actual owner," what's the guy who lied to you going to say when you see him again? "Oh, I lied to you (cuz that's what some people facing foreclosure do), but let me talk to you now?" 

3) So if you break this down; 2 hours/day 3 times/week = 6 hours/week, 24 hours/mth, not to mention the extra gas, etc. Even if you found a job that pays $12/hr, 24x$12 = $288, plus say $40 for extra gas you had to spend, that's $328. That's not $328 dollars. That's the cost of your time you are spending, driving around, trying to talk to people, who more than likely don't want to talk to you. (cold, out-bound prospecting). 

So if you factor in the cost of your time ($328), plus, say you had a part-time job, working 20 hours/week at $12/hr; that's $960. So $328+$960=$1288. You can more than pay for bandit signs where people are calling you (again, check your local town/city laws regarding bandit signs), or if you can't put up bandit signs, you can take about $1000 and send out 2000 post cards. If your response rate is 1%, that's 20 calls, talking to people who want to talk to you. 

Out of the 20, say 15 people call you just because they're curious. But you find 5 that are motivated, and get 1 or 2 under contract.  

4) Regarding response rate, it should be at a minimum 2-3%. If your response rate is not around 2-3%, that can mean your message is not optimized. I've done campaigns where I sent out 1800 letters, and got maybe 4 calls. But after reading what I wrote and getting feedback from my partners, my response rate jumped to about 4%. 

I've also done post card campaigns where my response rate was less than 1%. Then I changed a few things on the post card and it jumped to 2.5%.

So bottom line is, everything works. The question is which method you think will give you the best return for your time/money/energy and help you reach your goals faster. 

Johnny  

Wow, Johnny. That is an amazing analysis and you have given me a better perspective on things. Maybe I will go get a job and use the money on post cards. My question is, should I mail to divorces? Foreclosures? Absentee owners? Or all of the above? And what is the most cost-effective way to go about aquiring these lists? List source? Rebogateway? U.S. Leads list? Or others? Thanks so much again for the time and thought you put into your responses. 

@Trevor Jackson I think this discussion is turning into what has been on BP many times, "What type of marketing works best?"  and the answer is always the same "Depends on your area and the type of person you are."  My father-in-law door knocks when he sees a property he's interested in and he's purchased like that.  He doesn't have a goal of a certain number a week.  I don't like door knocking that much so I'm not going to be as good at it therefore I won't have as good as results as my father-in-law.  In my opinion door knocking can be very good if the property isn't listed because you have the advantage of getting ahead of others.  Talking to neighbors is usually great because they typically want the run down house in the neighborhood cleaned up and you can offer that.  I know some guys that will ask the neighbors if their lawn mower/boat/car is for sale to spark conversation, then proceed to explain they were interested in buying the house down the road.  

For my area bandit signs are working, but the city is starting to pick them up more frequently.  If you are tight on a budget god pick up the old bandit signs laying in the ditch, clean them off and paint them for $0.97 Walmart spray paint.  Much cheaper then buying.  I got my first contract off doing that.  

My point again is there's no ONE right way of doing it.  Be different to separate yourself and find the nitch that works best for you.  

@Trevor Jackson

Yes, there's no shame in having a job. I struggled for many years, telling myself "I can't go get a job, I need to make my career in finance work because I know wayyy too many people who are financially independent", without considering the fact that although that's sounds great, when you aren't paying your basic bills and getting in to debt, that can really hurt your motivation to get up everyday excited about what you're doing; and it'll seep out of you and affect the way you interact with people; whether they want to do business with you or not, which obviously hurts your ability to make a profit. Having a job for now so you're not stressed out about money is very important; something which isn't talked about much.

I get my mailing/post cardcampaign leads from List Source. (I haven't used other sources, so I can't speak about them)

Like I mentioned you can split your mailing/post card campaigns in to 2 categories:

A) Properties with Equity. Send yellow letters to them. ($1.30/letter from yellowletter.com)

- Absentee (in state & out of state)

- Probate

- Estate sales

- Properties which had recent fire (your local fire dept. may or may not give you this info)

-FSBO (Craig's List, Kijiji) These people you can just call, since they'll most likely have their phone # on the ad.

Below is a letter I use to get about 3% response rate. 2000 letter -> 50-60 calls -> 10 motivated sellers -> 4-5 properties worth seeing -> 1-2 under contract. Ratios won't always be exactly like this, but you get the idea. On my list, I highlight the people that have called back, letters which came back to me as Un-Deliverable, so when I'm doing my drip campaign on the same list, I'm not sending letters to those who already called me back, or it was un-deliverable. 

Ellen's my business partner. We have her name first, cuz we think people respond better to females. Just our opinion.

B) Pre-Foreclosures. Send post cards. (about $.49 cents/postcard from Vistaprint). My response rate is about 2-2.5% on post cards, but gets better on the 2nd and 3rd drip campaign.

- Properties with no equity (short sale), since people who have equity that are in foreclosure can still sell their house and payoff the mortgage. (other’s in BP have talked about flipping those. I’ve never flipped a property in foreclosure that had equity. All my pre- foreclosures have been short sales). I prefer sending post cards to people in pre-foreclosure because a lot of them are mentally in denial. So why spend $1.30 sending them a letter, when I can spend about $.49 cents; and as soon as they get the post card at least they've seen the message, and decide whether to call us or maybe call us some other time. I do drip campaign for post cards as well.

C) Later on, when you've closed a few deals and you have the money, you can also target for motivated sellers by having an SEO optimized site and and doing PPC and google adwords, etc, which a friend is helping us with.

We are working on having a separate site for pre-foreclosure leads, so it's easier for us to track which lead funnel is doing what. Be sure to have separate contact info for each of your sales funnel. (i.e. yellow letters to one phone #/email, and a different phone #/email for post cards, and a different phone #/email for your online marketing.)

D) Also, consider finding a mentor who can help you. I wrote this response to someone asking about what they should do as a newbie starting out wholesaling http://www.biggerpockets.com/forums/93/topics/204099-wholesaling

I got my first deal under contract within a month of sending out 1800 letters, and closed on that the following month, netting $16,500 and haven't door-knocked since.

Go make it happen! :)

Johnny

Hi Trevor, I want to encourage you. Everything works! I've door knocked, please consider this advice:

1. Door knock when people are home, usually after 6:00. Go on weekend evenings, especially Sunday evenings. 

2. Have your business cards and purchase agreements ready.

3. Always ask for referrals. Be a solution maker. If you can't help them ask if there is anyone in the community/or friend you can help.

4. Be humble and respectful toward the homeowners.

5. Always ask the neighbors if they have a phone number for the homeowner if the house is vacant.

6. Work with others. Find 2 to 3 trustworthy contractors (referral fees). Let say you go to a property and its already vacant. And you notice the house next door needs a roof. Knock on the door, tell them you buy houses, ask if have a forwarding contact for the homeowners of the vacant house. And, let them know that you work with a great contractor who can fix the roof at a discount if you mention there name. Stay in the loop.

7. Be very organized, upload everything into a CRM at the end of the day. Follow up with everyone you can verify is in foreclosure and lives in the property. Continue to follow up until the bank forecloses.

8. http://www.realtytrac.com/, consider using it

9. If you can't buy it. Consider offering them a short sale. Or refer them to an agent for a short sale and work out a referral fee if the property closes.

Hope that helps.