Can't find answer to the most fundemental question-help

Starting Out
20yFollow

Can't find answer to the most fundemental question-help

N/A N/A
Member since 2008 · 8 posts · 0 votes

I have read 6 preforeclosure real estate books, but some of the most important macro questions don't seem to be addressed in them.

Investors are ultimately looking for a deal that has equity and you can flip with at least a 20%+ profit margin (unless you are doing a short sale).

Question #1: If that's the situation, why wouldn't the home owner just sell their house and do the same thing?

The home owner may not have the money for payments, and poor credit preventing them from tapping into the last 20% of equity, but they could still sell their house. The only reason I can see is if they waited too long and don't have time to sell before the auction.

Their are a few unique situations: 1. not educated to know that, 2. Denial 3. Divorce--even if it's in their best interest, they would rather make their ex-suffer by destroying eachother, 4. death, no one to do it. 5. simply waited too long before choosing to sell. These must be a small portion of the foreclosures.

Question #2: Is the only thing we are banking on is their ignorance?

Most of the seansoned people are saying you should approach the preforeclsoure with the intention of helping the people and building a relationship.

Question #3: Do you really tell them what there legitimate options are? If it has good equity, they will sell it on their own and you lose the deal. If it has poor equity, you don't want it anyways (unless doing a short sale).

Qustion #4: There are special circumstances (such as short sales and rehabbing) that give an investor a comparative advantage over the the home owner and are where the investor adds value. Barring those 2 situations, what is the value-added that we as investors can bring that he homeowner can't?

Qustion #5: It seems that marketing to owners late in their foreclosures would be best since they don't have time to sell. Is this correct?

Question #6: Is the answer to all of the above -- the deals that are apealing (the ones with equity or that you could make money on) are the ones where the owner waited too long to sell, they are uneducated, or simply don't care. Or they have little equity but are good short sale candidates? Does that sum it up?
Thanks!

0Reply
19 views

6 Replies

Jump to latestLatest
  • Wes Tuinstra
    Member since 2008 · 664 posts · 18 votes
    20y

    Hello.

    I won't answer all your questions because that would take all
    the fun out of it for others....

    Foreclosures can be good deals because at the auction you can
    get the house for relatively little.

    If a person is being foreclosed on and they have tons of equity,
    you really will be doing them a service by buying it so they can
    pay the mortgage and get their money out.

    You would definitely sit down with them and show them ALL their
    options.

    0Reply
  • N/A N/A
    OP
    Member since 2008 · 8 posts · 0 votes
    20y

    Don't get me wrong, I beleive there are good deals in PRE-foreclosure and you can get homes for relatively little, but I don't understand why a homeowner wouldn't just sell their house if they had equity?

    Thank you for your feedback. Please note, I believe in pre-forclosures. I just want to learn and understand pre-foreclosures from ALL perspectives so that I will be more effective and understand the marketplace-- not just the steps to follow.

    Look forward to more comments.

    0Reply
  • Eliza Parsons
    Real Estate Investor · Costa Mesa, CA · Member since 2008 · 37 posts · 2 votes
    20y

    Well, being in sales has helped me quite a bit to use the TRUTH to my advantage. I always suggest to tell the truth, because if it were me on the other end, I wouldn't want to be taken advantage of. However, you can help people see the truth that you want them to see.
    Now to make some sense - yes, the homeowners can definately just sell their home on their own. However, I can tell you from firsthand experience how homeowners feel about this situation. I used to work for a company that helps people currently in foreclosure work out a repayment plan with their lender. The majority of the homeowners I spoke with were just plain in denial. Most of them waited until a week or 2 before the aution date, hoping for a miracle.
    Also, when selling/persuading the homeowner, remind them how long it can take to sell a home. The housing market isn't the same as 2 years ago. Homes aren't appreciating as fast, and therefore, homes are on the market for a lot longer. There are a million issues that can come up in a sale, even after they find a prospective buyer that can hold things up. Depending on the state, termite inspections might be required by the lender, home inspections, and not to mention other contingencies. Also, escrow can take a while to close. Depending on the way you want to proceed, you seem like a more surefire way of getting things taken care of. Either way they might lose their home, but if they go with you, they don't have to worry about an actual foreclosure on their record.
    hope my rambling helps a little :roll:

    0Reply
  • N/A N/A
    OP
    Member since 2008 · 8 posts · 0 votes
    20y

    I thank you, I have a better understanding now. I have learned a few things since posting my question. Originally I made some incorrect assumtions.

    I thought that we would get in contact with the home owner early on in their foreclosure (with several months before the auction), and that people were rational. If that were the case I thought that if you were honest with them you would have to tell them to list their house with a realtor at a very fair price to move it quickly, end foreclosure and maybe get some equity.

    What I have since learned is that the majority of the people wait far too long and don't contact us until it is basically too late to sell via traditional methods. Accordingly you can be honest and tell them the best thing to do is to sell their house to you as you can close in 5 days.

    0Reply
  • Eliza Parsons
    Real Estate Investor · Costa Mesa, CA · Member since 2008 · 37 posts · 2 votes
    20y

    Well, you definately CAN contact them early on in the process. Please forgive me, but I don't remember how long Florida has to cure the loan after the NOD has been issued, and I can't find my list. Anyway, while some states homeowners can have over 10 months to cure the loan, others can be much less...like 2 months. But you're right, even early on in the process, people aren't always rational. Remember, to them, it's not always just a piece of property, it's their HOME, and most are quite attached to it. But then again, there are those that realize pretty quickly that the best thing for them to do is sell with an agent.
    Why don't you try to market to them early on in the process, with a letter, or flyer, or something, and contact them again down the road to see what action they took? That wouldn't be my style, I would just wait until about a month before the auction.....but that's just me.
    When are you planning on starting? Or have you already? Let me know how things go.

    0Reply
  • Jim & Michele Wilcox
    General Contractor · Scottsdale, AZ · Member since 2008 · 100 posts · 7 votes
    20y

    They don't think to do it or are not savvy enough to think of it or don't have the fix-up money to do it or ... or .... or .... :D

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free