Buying preforeclosures to flip

[Devin Bost]

I've been aggressively studying how to successfully buy, rehab, and flip (aka "redevelop") residential properties, and I'm currently working on my marketing strategy. I've been investigating the idea of looking for off-market pre-foreclosure properties specifically, and I'm wondering if anyone has any tips or stories "from the trenches" regarding how to do this successfully and how to avoid any critical pitfalls. 

I'd also like to know about things like:

• How motivated are the sellers typically (especially in comparison to other types of distressed seller situations)? 
• How easy is it to find motivated pre-foreclosure sellers (especially in comparison to other types of distressed seller situations)?
• Are there legal complications that can occur?
• How sensitive do you need to be with the timing of the sale, such as when foreclosure proceedings are starting or about to start?
• Are there additional risks that are more common with these types of properties?
• How often are the sellers very emotional and hard to deal with?

Any guidance would be much appreciated.

[Steven Goldman]

Quote from @Devin Bost:

I've been aggressively studying how to successfully buy, rehab, and flip (aka "redevelop") residential properties, and I'm currently working on my marketing strategy. I've been investigating the idea of looking for off-market pre-foreclosure properties specifically, and I'm wondering if anyone has any tips or stories "from the trenches" regarding how to do this successfully and how to avoid any critical pitfalls. 

I'd also like to know about things like:

• How motivated are the sellers typically (especially in comparison to other types of distressed seller situations)? 
• How easy is it to find motivated pre-foreclosure sellers (especially in comparison to other types of distressed seller situations)?
• Are there legal complications that can occur?
• How sensitive do you need to be with the timing of the sale, such as when foreclosure proceedings are starting or about to start?
• Are there additional risks that are more common with these types of properties?
• How often are the sellers very emotional and hard to deal with?

Any guidance would be much appreciated.

 Hi Devin, I have been involved in many short sale and pre foreclosure sale transactions. The key is to be able to detect that the borrower is late and arrange for a sale prior to the default notice. In a judicial State the default notice only starts a lengthy process until foreclosure. The pre foreclosures are only a good deal prior to an agent listing them for sale at full price. So you need to get leads on lates, or get courthouse information and than direct mail, call, door hang or knock in order to make direct contact with the owner. You need to be able to accept rejection and also persevere. Borrowers who are late often ignore all attempts to contact them because they can not deal with the emotional stress of their mortgage default.  I have found that the most tenacious investors who are able to make contact with the owners are rewarded with the best deals. 

All of the owners are highly emotional. So it requires strong communication skills and the ability to persuade them to take action when they are often in ostrich mode. I often find bird dogs who were familiar with the communities we were interested in and would be able to more easily contact the owners because they were living in the community. Good luck.