Wholesaling a Pre-Foreclosure? (Am I Doing This Right?)

[Joshua Lindsey]

Pre-Foreclosures are a niche in my market because there are so many of them. It's a perfect scenario for motivated sellers as they're already in a desperate situation most of the time...

I've learned a lot from BiggerPockets. Yes, I've already read EVERY discussion with other members posting similar questions. 

However my situation is rather unique.

I want to know if I'm going about this the right way: and what better way to do it than by asking the professionals on BP?

Now, I've been busy obtaining Lis Pendens lists from my local town/city hall (which is like an hour from me...) and did some research on the properties I've obtained. Some were filed that same day, the day before, two days prior, etc. 

I went ahead and contacted the owner of a property after obtaining their phone number. Typical motivated seller phrase: "I'm out of state, I just wanted to get rid of the house", etc.

What caught my attention is that he says he's been living out of state for nearly the length of an entire high school career. Odd considering his house is in Pre-Foreclosure. 

He advises me to contact a company called FayServicing if I want to inquire about the house. Apparently they have a debt collection agency and are a third party for helping homeowners rectify their mortgages that they're falling behind on. My best bet is that he's fell too far behind with payments with them so the house fell into Pre-Foreclosure. (Yes, I will just go ahead and ask him, no need for sarcasm :) )

I have a Cash Buyer that is very serious about obtaining this property. He wants me to simply flip (assign) the contract to him. Obviously I've incorporated the remaining balance (which I still need to verify) in the asking price along with my spread. He's aware of any repairs and update that need to be made. 

I suppose I'm trying to ask if what I'm doing to go about closing this deal seems okay to you guys...

What I Have Done

1. Obtained Lis Pendens list

2. Researched houses 

3. Found one I'm interested in (house has $164,000 equity..! and a $20,000 remaining balance)

4. Contacted Seller (is motivated, just doesn't care about the house, just wants it gone)

5. Seller refers me to FayServicing

6. I contact FayServicing about the house

7. FayServicing says to email their department (reo at fayservicing dot com) (weird, I know. But I can't post emails on forums)

8. I email their department about a house I am interested in paying off in order to obtain.

What I am Going to Do/What is Going to Happen

9. Find out how I can go about paying the outstanding balance (I may need authorization from seller, in which case I would call and have him allow me to make the payment or whatever the case may be) (I'll find this out from the email I get back from their department I assume)

10. Get the Seller under contract (electronic signature since he is in a different state; not the most appealing or best way, but it's something as I can't secure the deal without it (obvs); get them under contract for the remaining balance + an offering I do for my pre-foreclosure homeowners - I give them 10 - 15k. This is incorporated in the asking price I give my cash buyer which motivates the seller to sign and sell quickly)

11. Show the home to the Cash Buyer (all of my cash buyers habitually want to see a home before they purchase. Always. Nothing wrong with it, just stating a fact!) (This step may need to come earlier or later, but this is a vital one and has to be done at some point before 12 obviously)

12. Flip (assign) contract to Cash Buyer with 'asking price' (within my asking price, I incorporate my spread (commission, percentage, whatever you guys call it), any outstanding balances and the money needed for the seller). The Cash Buyer is aware the house is a Pre-Foreclosure and has an outstanding balance that needs to be rectified. 

13. Get Paid! Pay off the outstanding balance and the seller what they're owed (both stated in Purchase and Sale Agreement for everyone's safety).

Obviously some of this is not traditional, such as getting something under contract before a debt is paid, but Real Estate Investing is usually more open to creative solutions. 

I absolutely line up buyers before I do anything. That's just how I roll. I have built a list of over 10 cash buyers that I advertise my properties to. 

...and yes, this is a lot of work to do before the Cash Buyer even VIEWS the home (1 - 12), but it's a chance I'm willing to take. He is not my only cash buyer and I can advertise a house within a week and get multiple offers anyway. Unless there is something so wrong with the house that not even I can ignore, then me not selling to one cash buyer isn't the end of the world. 

No, I have not seen the inside of the property yet.

Yes, the Property is Off-Market. I can see it on RealtyTrac verifiably under pre-market and pre-foreclosure status (I don't put all my eggs in one basket, I know RealtyTrac has pros and cons in regards to its reliability, dependability and accuracy, like everything else on the internet... (lol).) Plus I verified it's off market other ways. 

Let me know what you guys think! Is everything I have done/are going to do correct? Are there extra steps I need to take to protect myself? Any advice?

Thanks in advance BP community. 

It's my first post, by the way... so forgive me if I didn't post this in the correct area.