How do you wholesale a pre-foreclosure home or a foreclosed home?

Question

I need help understanding this, if the owner owes an outstanding mortgage how do you go about this?

Lydia R. · Answer

@Summer Hall I typically caution newbie wholesalers to stay away from preforeclosures because there are a lot of moving parts that most newbies dont understand and because if you tell these people facing losing their home that you can help them and then you dont help them you are at risk of getting sued.

There is no such thing as a foreclosure property without a mortgage. If there was no mortgage then there would be no foreclosure...unless you are talking about a property tax foreclosure but thats another story.

You will need to determine the payoff amount, the amount of any other liens on the property, the repair cost and the ARV. You have to be able to put the property under contract for a price that will pay off the mortgage, payoff any other liens and give the homeowner some money (otherwise why would they work with you) and still have it be a deal for an investor to buy from you. Its not impossible, but not really the best place to start when you have never done a deal before and dont have the resources to get the deal done.

Lydia R. · Answer

@Jeremy Ransom Well the first and most important step that most newbies overlook is learning/understanding how foreclosures work in their state/county. Are you in a judicial or non judicial state? Is there a redemption period after the auction? What is the process/timeline for foreclosures in your county? After you understand the process you have to be able to get all the necessary info to be able to analyze the deal. What is the total payoff amount? Are there other liens on the property? What is the rehab going to cost? What is the ARV of the house? How much money do you need to give the sellers? Where are the sellers going to go...a lot of people overlook this part as well. You have to be able to get an accurate payoff which may require speaking with the bank (or loan servicer) which requires an authorization from the homeowner. Lastly, you cant be the shady wholesaler who says they can help, puts the property under contract and then cant get a buyer. Because when you back out/cancel the contract and the owner loses their house they are going to blame you and thats how lawsuits happen.

Jay Hinrichs · Answer

Nice to have someone come on here and speak the truth.. instead of all the BS we are going to help solve their problems.. Your exactly right they want to stay.. and the reason it goes to auction Is denial and the hope that something is going to save the day last minute.

this is no place for those without any money to be working.. not fair to the owners.. and  a big huge waste of the person working these deals time and money.. they will go broke fast.  its just guru speak that we make a killing in foreclosure.. I mean people do but those people have millions of dollars in cash behind them.. and can cut checks. .if you cant do that its a waste of time.

Jay Hinrichs · Answer

@Lydia T.

Because when you back out/cancel the contract and the owner loses their house they are going to blame you and thats how lawsuits happen

YUP  this is why many states have very strong foreclosure rescue laws.. too many all hat no cattle were tieing up property with unsuspecting sellers only to have the so called wholesaler who is going to solve their problems  fail and they lose the house.. instead of just listing and selling it..   bad juju  .. but you know how this goes half the people care for others the other half only care about their self.  this is simply not the place for no money starting out people.

also the OP  needs to understand you cant have a foreclosure if you don't have a mortgage.. you can have a tax sale..

Dylan Barnard · Answer

You can also look into more creative strategies like subject-to financing, where you just take over the existing financing and put cash down for the equity if there is any.

A lot of people think this is a dangerous strategy because the bank can technically call the full amount of loan due at any time, but in practice, if you are making payments, the banks don't usually care about who is paying them.

Jacob Michal · Answer

you've got to be able to sell the house for more then what the mortgage is owed for example if you put a house under contract for 200k and the mortgage has to be under 200k for you to make any money mortgage can't be more then what the house is worth

Jeremy Ransom · Answer

@Paul Amegatcher Awsome advice. I was just thinking that i should just get back to driving for dollars. I dearly appreciate you confirming that information on the topic as well as @Lydia T. A great help for sure!

Paul Amegatcher · Answer

Jeremy,

Lydia is correct that most homeowners in pre-foreclosure or foreclosure would rather stay in their homes and want to figure out how to stay there. The only success that I have had with pre-foreclosures/foreclosures were when the homeowners had accepted their fate of losing their property or they had already moved out of the property. Those individuals are more willing to entertain an offer and resolution for their problems. I remember calling pre-foreclosure at the beginning of my career and talking to folks and they would tell me they were resolving the issue with the banks meanwhile they were doing nothing.

If you want to find quality leads as a newbie I would focus on Driving for dollars and cold calling the vacant leads that you get. This is the tried and true way of getting a deal in 30 days. Once you start making some money then you can invest in Facebook ads or direct mail.

Lydia R. · Answer

@Jeremy Ransom Didnt know we are in the same state! There are a lot of informative resources for TX and Dallas county especially. Keep in mind that most people in foreclosure dont want to sell, otherwise there would be a flood of properties on the market every month before the auction. Most of these people want to find a way to keep their homes. A lot of the ones who do want to sell are upside down in their mortgage. I know you want to think that you are helping people, and thats great, but the reality is that most of these owners would rather find a way to stay then to sell.

Jeremy Ransom · Answer

@Lydia T. Ah I see! So the Pre-Foreclosures are for sure for the more seasoned investor. Wouldn’t want to get to far over my head in that case. Hate you beer of subject but where should a newbie look to start?

How do you wholesale a pre-foreclosure home or a foreclosed home?

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