Why 90% of Investors Fail at Pre-Foreclosures (and it is Not What You Think)

Question

With foreclosures on the rise, most investors assume that pre-foreclosures are where the easy deals are to find distressed sellers and built-in equity. However, the reality is that 90% of investors fail in this space and it has very little to do with deal quality. The real issue is that most approach pre-foreclosures like a transaction instead of a situation. Homeowners in pre-foreclosures aren’t your typical sellers. You are dealing with people under financial and emotional pressure, often facing fear, uncertainty and urgency. If you don’t understand that dynamic, you have already lost the deal before it starts.

Where most investors go wrong comes down to a few key issues:

• Leading with the offer instead of the solution
• Treating outreach like a one-time effort instead of building a consistent follow-up system
• Not fully understanding the numbers such as the arrears, liens, timelines, payoff vs reinstatement
• Trying to win the deal instead of solving the seller’s problem
• Failing to build trust through consistent communication

At the end of the day, pre-foreclosures aren’t about chasing motivated sellers. They are about understanding people in high-pressure situations and positioning yourself as the one who can actually help. The investors who win in this space aren’t the ones sending the most messages. Instead, they are the ones with the best systems, the strongest follow-up and the ability to connect, educate and solve real problems.

If you have worked pre-foreclosures before, what do you think is the biggest mistake investors make and what is your biggest win or loss?  If you are not working pre-foreclosures, what is holding you back?

Janice Carter · Answer

@Clement Oigoga Adams My recommendation is to start by targeting homeowners who have recently received a Notice of Default or Lis Pendens filing. You can find these in your local newspaper, foreclosure attorneys website or websites such as Propwire.com. Focus on building relationships rather than immediately trying to buy the property. The investors who are most successful are usually the ones who approach these homeowners with empathy, provide options and consistently follow up.

Janice Carter · Answer

@Jay Hinrichs Thanks for your input. I agree that many homeowners facing foreclosure are often in denial, procrastinate and can be very difficult to reach. However, I have found that while many won't answer phone calls, they will often respond to text messages. I also agree that motivation tends to increase significantly as the foreclosure sale date approaches which is why consistent follow up is so important throughout the process.

Janice Carter · Answer

@Jay Hinrichs Thanks for sharing. That actually makes a lot of sense from both a safety and effectiveness standpoint. I may have to give that approach a try as we are seeing an increase in foreclosures in the Atlanta market. Having the right person leading the conversation can make a big difference.

Janice Carter · Answer

@Jay Hinrichs I would think that door knocking is one of the most effective ways to reach distressed homeowners because it creates a personal connection that mail, calls and texts can't. That said, I have never been a door knocker. Just not comfortable doing it. Do you personally do the door knocking or do you hire someone to do it?

Ken M. · Answer

I made my first million doing foreclosures. It was basically all door knocking and a gun or two pointed at me, along with a couple of lawsuits. It's a tough racket for tough people.

Most people who haven't been through a foreclosure cycle in the economy are unaware of the stiff penalties the new laws bring. Some of those laws include jail time. Speak to an attorney in the area (State) you want to fish for foreclosures before you get yourself in a lot deeper than you can swim out of.

Clement Oigoga Adams · Answer

@jay

@Jay Hinrichs your reply was very detailed and I liked it, and sir I am a beginner in all the real estate investment side and was wandering if you entertain questions in your dm?

Clement Oigoga Adams · Answer

Wow thank you @Janice Carter for your honest reply. And also Mrs if you don't mind since you are a broker I don't know of you will be interested in a chat about the foreclosures?

Why 90% of Investors Fail at Pre-Foreclosures (and it is Not What You Think)

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