Foreclosure before Foreclosure

[Carol Mthimkhulu]

Hi, my name is Carol (27) and Im from South Africa. Yes, way in Africa and I came across BP during an enjoyable read of The Book on Flipping houses with J Scott.

Even though Im in a different continent altogether, I still believe that real estate basics/concepts should remain similar globally, with the exception of the big L “Law” and this I have taken into account.

Real Estate experience: I have owned a single 2 bedroom home since 2013 which ive used as a rental property. Currently im in the process of expanding my portfolio which will include flipping single family homes undergoing foreclosures.

My question for today is, have you ever approached a foreclosure –home owner before the auction date?

Well im currently considering this route wholeheartedly, thinking if I can approach someone whose home has been listed as a foreclosure before the auction date, negotiate with them to pay their outstanding fees provided that they will sell their home and in turn split the profits.

• 1.But what does the law say about this?
• 2.What sharing ratio would you suggest for this kind of strategy?

The way I think of it, is that the advantage would be as follows:

• 1.Eliminating competition by avoiding the house to be auctioned.
• 2.The owner will get some profit, unlike their home being foreclosed and they are left with no money.
• 3.During reselling phase, the owner would still be occupying the home until the purchase date.

And many more, but basically both parties will win.

What is your take on this strategy? 

Do you have educational readings that i should consider? 

How do i approach people facing foreclosures?

Awaiting your responses 

[Dell Schlabach]

Originally posted by @Carol Mthimkhulu:

Hi, my name is Carol (27) and Im from South Africa. Yes, way in Africa and I came across BP during an enjoyable read of The Book on Flipping houses with J Scott.

Even though Im in a different continent altogether, I still believe that real estate basics/concepts should remain similar globally, with the exception of the big L “Law” and this I have taken into account.

Real Estate experience: I have owned a single 2 bedroom home since 2013 which ive used as a rental property. Currently im in the process of expanding my portfolio which will include flipping single family homes undergoing foreclosures.

My question for today is, have you ever approached a foreclosure –home owner before the auction date?

Well im currently considering this route wholeheartedly, thinking if I can approach someone whose home has been listed as a foreclosure before the auction date, negotiate with them to pay their outstanding fees provided that they will sell their home and in turn split the profits.

• 1.But what does the law say about this?
• 2.What sharing ratio would you suggest for this kind of strategy?

The way I think of it, is that the advantage would be as follows:

• 1.Eliminating competition by avoiding the house to be auctioned.
• 2.The owner will get some profit, unlike their home being foreclosed and they are left with no money.
• 3.During reselling phase, the owner would still be occupying the home until the purchase date.

And many more, but basically both parties will win.

What is your take on this strategy? 

Do you have educational readings that i should consider? 

How do i approach people facing foreclosures?

Awaiting your responses 

Unless things are different in Africa, the biggest problem with the strategy is, most of the houses going into foreclosure are underwater, the owner owes more, then the house is worth, otherwise they would just hire a realtor and sell the house before auction. 

[Bhekizwe M.]

Hello @Carol Mthimkhulu

i would say its a question of access to information of those foreclosures.If the information is easily accessible, there is bound to be substantial competition.

1) i am not 100% sure but the bank keeps the title deeds for "safe custody".If you can get around that then definitely you can sell the house with no problems

2) On splitting the profits,its about negotiating and what they will take.How long have they been paying down that mortgage? if more than 2-3years they might feel they have some equity to cash out.

[Valerie Hiscoe]

Buying a property at below market value is always the goal and helping someone who is struggling with an impossible situation is usually the place that you look for those deals. Your emphasis should probably not go towards "splitting the profits" (which, as mentioned above, why would they need you if that was the case), your strategy might be better directed at saving them from the pressure of their present situation without taking over their troubles. Preforeclosure, the bank has claim to the full amount owed on the property.  It's only afterwards that they're willing to negotiate that amount so it's definitely worth following the leads as long as you're very clear on your parameters.  Not a lot of properties will fit within them and I'm not really clear on how you'll find any with profits enough to share.

[Carol Mthimkhulu]

@Valerie Hiscoe  Hi

Thank you for the feedback.

I will reconsider the angle, to approach the market. Indeed a supportive partnership is key, rather than a dominating character. 

[Carol Mthimkhulu]

Hi @Bhekizwe M. ,

I have currently subscribed to the deeds office in obtaining the owner records as well as know when the auction/foreclosure will take place. Yes this information excludes the amount of default. 

However, it gives me direction in knowing if the houses I view have equity or not. 

I think though im still uncertain, about this strategy as in  how can I be certain that this individual  will follow through once i have settled his debt?

[Carol Mthimkhulu]

Hello @Dell Schlabach

True, however i recently purchased a property at an auction for less than half its worth. So it is possible to find customers who are really underwater and those who are not. 

Depending on my farm area, the houses i target are usually known/estimated to be within a certain retail bracket. :-)

The onus will come in my analysis regarding the feasibility of the deal. 

You actually triggered a question, I will find out under which conditions do banks in South Africa file for foreclosure on a home owner. I figure if i can know this, and know the purchase price of the home, i can be able to do the math of how much is owed even before approaching them.

Thanks for the homework. 

[Bhekizwe M.]

An affidavit accompanied with the purchase and sale agreement,approved at the local court and filed at the deeds office will prevent any seller denying earlier agreements

consult your legal counsel for finer details