Ralph R. Roberts - Foreclosure Investing For Dummies

You can’t offer legal advice if you’re not a licensed lawyer, but you can inform homeowners of their options and recommend professionals who can help. If the homeowners can refinance their way out of a foreclosure, you may be able to steer them to a loan officer or financial adviser who can provide additional assistance. In Chapter 4, I explain how to assemble a team of experts who can help you buy and sell foreclosure properties so that you’ll have plenty of experts on hand to recommend to the homeowners.

Understandably, when people are in a financial bind, they’re often upset, anxious, and angry. Parents have the daunting task of facing their kids and telling them, “We can no longer afford to live here.” They’re embarrassed about what their neighbors, friends, and family may think. They may be angry at their boss for laying them off or firing them. In many cases, the husband or wife has just found out about the pending foreclosure from their significant other who spent the family into the poorhouse. During the COVID-19 pandemic, many homeowners struggled with the financial fallout from family illness, job loss, business closures, and mandatory shutdowns.

When you show up at the home of a couple or person facing foreclosure, and you tell the homeowners that you want to help them by buying their property, all that fear, frustration, and anger is likely to get unleashed on you. Even if you can manage to avoid direct conflict, you may be recruited into refereeing a domestic dispute or witnessing emotional outpourings that you’re just not used to seeing.

Distressed homeowners are often most upset about something that happened in the past — something they can’t go back in time and fix. One of your first jobs when dealing directly with homeowners is encouraging them to put the past behind them and address the current situation. Shifting focus to the present can reduced the emotional energy significantly.

You can often relieve some of the pain of foreclosure by letting the homeowners know that they’re not alone. Know the foreclosure statistics for your area, share this information with them, and let them know about their options. This information can often defuse a tense situation and remove some of the anger that may be causing a rift in a couple’s relationship. Ask at your county’s Register of Deeds office; sometimes, the office tracks foreclosure numbers for the county and may be able to provide city, county, and state statistics.

The most successful pre-auction investors are people who are well versed in local foreclosure laws and procedures and who can quickly and accurately assess the average homeowner’s financial predicament. To determine whether you have the qualities to invest successfully in properties in the pre-auction stage, place a check mark next to any of the following statements that you feel are true:

People generally like me and trust me right off the bat.

I feel comfortable talking with people I’ve never met.

I’m a good listener.

I’m diplomatic, often acting as the mediator when friends, family members, or co-workers have issues with one another.

I never met a problem I couldn’t solve.

I’m good with math, especially dollars and cents.

I can tell people the truth even when they don’t really want to hear it.

I can handle disappointment. Even if I’ve invested a great deal of time and effort in helping a homeowner, I won’t get terribly upset if I don’t get the house.

I can let people fail even after I offer them outstanding advice on how to avoid a catastrophe.

Having every single one of these qualities isn’t essential for success in investing in pre-auction properties, but if you checked only two or three items, you may want to consider stepping into the foreclosure process at the auction or post-auction stage. The more of these qualities you have, the more successful you’re likely to be in dealing directly with homeowners.

Whether you buy properties directly from homeowners before auction or wait until the auction, the weekly foreclosure notices in your area are required reading. In almost all areas of the country, the lender must post a weekly foreclosure notice or Notice of Default (NOD) in a publicly accessible publication several weeks before the auction. In my area, the foreclosure notice must be posted for four consecutive weeks before the sale in any public newspaper that serves the area. The appendix at the back of this book explains each state’s requirements for posting foreclosure notices.

The posting of the foreclosure notice is almost an entirely separate stage of the foreclosure process — after negotiations between the homeowners and lender break down, but before the property is sold at auction. At this stage, every foreclosure investor in your area probably knows about the property, and any investors who are interested in buying the property before auction are likely in the process of trying to contact the homeowners.

The investor who arrives first and whom the homeowners trust most is typically the investor who stands to get the property.

As you discover in Chapter 7, you can find foreclosure properties even before the foreclosure notice is posted by keeping your ears open, networking effectively (as explained in Chapter 6), and getting the word out that you buy properties.

Many foreclosure investors don’t like dealing with distressed homeowners until the official foreclosure notice is posted because until that point, homeowners may be unwilling to accept the fact that foreclosure is imminent. The posting of the foreclosure notice removes most of the lingering doubt and acts as a wake-up call, spurring the homeowners to take action.

The foreclosure notice offers several additional benefits:

Contains the location of the property (usually a legal address, not a street address, but you can use the legal address to obtain the street address, as discussed in Chapter 8)

Lists the names of the homeowners being foreclosed on so you can refer to them by name instead of addressing them as “sir” or “madam”

Specifies the name of the lender foreclosing on the property, so you have the information you need to gather more information from the lender

Provides the name of the attorney or trustee in charge of liquidating the property, so you have someone to call for additional details

As you’ll discover throughout your experience as a foreclosure investor, every bit of information you have about a property is a valuable puzzle piece that clarifies the situation and enables you to put together an attractive deal that benefits all those involved.

Just because the lender posts a foreclosure notice doesn’t mean that the property is destined for the auction block. Any time before the sale, the homeowners can strike a deal with the lender, refinance with another lender, or sell the property. As soon as the foreclosure notice is posted, the clock starts ticking for any investor who’s looking to buy the property before auction.