February 2008

Investment Exchange

An educational real estate newsletter

Preforeclosures from A-Z

(Part II of III)

Read Part I  |  Part II  |  Read Part III

In our last edition of "Investment Exchange," we kicked-off our three-part preforeclosure series because, as we stated, the massive benefits and financial rewards of investing in these types of deals are simply undeniable.

Buying a preforeclosure — a home in the process of foreclosure but not yet repossessed by the lender — is more often than not a worthwhile investment. In fact, many people make full-time professions of purchasing preforeclosure homes and reselling them.

You can, too.

Foreclosures are on the collective rise throughout the nation, meaning investors have fantastic opportunities to cash in right now before the homes are repossessed, as well as bail out distressed homeowners from terrible situations.

Put simply, if you are thinking about investing in real estate (or have ever thought about it) now is as good a time as ever to get in on the action.

That's because the profit turnaround time is fast with preforeclosures and homeowners are eager to sell. In addition, there is now a wide selection of preforeclosure properties from which to choose ... something that was unheard of just two years ago when the market was booming.

We've already told you where to find great deals on Foreclosure.com, as well as how to analyze them quickly, in our previous installment. This time around, therefore, we'd like to cover how take your search to the next level and start turning hot leads into amazing deals.

It's truly a win-win for preforeclosure buyers and sellers, considering the unfortunate circumstances. However, you'll soon realize that making the best out of these bad situations is rewarding ... financially and spiritually.

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Site feature spotlight

See it to believe it

Preforeclosure investing — pretty much like any other investment strategy — requires a certain degree of travel.

In short, you're not going to make offers on homes without inspecting or driving by them first. Furthermore, there may be a need to speak with homeowners frequently face-to-face about their willingness to sell their properties.

Therefore, it's important to set a distance limit on how far you are willing to travel, whether it's 15 miles or 45 minutes. This ensures that you're not wasting too much time in the car and spending more time at the negotiating table.

In addition, we have another new feature that could help you weed out some less than desirable deals before you even put the car key in the ignition: Pictometry.

DSNews perhaps describes it best:

"Imagine having the ability to view every crack and crevice that appears on a foreclosure property's exterior without leaving the comfort of your own home?"

That's right, Foreclosure.com now provides cutting-edge aerial oblique image technology for most of its more than 1.8 million nationwide real estate listings.

Pictometry allows users to view landmarks, roads and complete municipalities from multiple directions (North, South, East and West) and angles with just a few mouse clicks. In fact, features such as a house, building, street light — even a fire hydrant — can be seen in their entirety thanks to the leading-edge innovation.

For example, with Pictometry, Foreclosure.com visitors can drill down and see front doors, backdoors, windows and other home features.

"As a real estate investor, one of the most important details when searching for a great deal is the exterior condition of the home," said Foreclosure.com President and CEO, Brad Geisen. "Even if it's just a shot of the outside, that one photo provides a potential buyer with a good sense of what is for sale. Pictometry ensures that our visitors get this all-important first look."

In addition, the aerial images provide a unique neighborhood perspective, which is uncommon for the traditional photos that brokers and Realtors® often upload to their listings. In short, Pictometry images are above and beyond traditional images on real estate listings.

If you've been searching for preforeclosure deals then more likely than not you've already enjoyed the unique benefits of Pictometry. In case you have yet to see it with your own eyes then visit Foreclosure.com and search our industry-leading comprehensive foreclosure database right now.

House hunting will never be the same.

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Web site search tips

Email alerts just got better

You asked for it and we listened ... Foreclosure.com has made its industry-leading FREE email listing alerts even more convenient.

Not only have we consolidated all of the various property alerts into one email, but we redesigned the appearance of the email to include even more eye-catching, easy-to-use features.

Let's back track for just a minute:

FREE email listing alerts, which include the latest foreclosure, preforeclosure, tax lien, bankruptcy and other distressed listing updates on our Web site, are conveniently delivered directly to your inbox.

In short, these notifications alert you to the latest property updates we list on our site in the precise zip codes that you pre-select.

There's no obligation whatsoever to sign-up and receive FREE email listings alerts, which can be set up in literally just a few seconds thanks to our quick three-step process.

In real estate, timing is critical. Sometimes just one day — or even a few hours — can mean the difference between a huge profit and a missed opportunity.

And while our comprehensive nationwide database of more than 1.8 million listings is simple to search, we understand that it is sometimes hard to keep up with all the amazing bargains that we add to the site at least twice each day, including weekends and holidays.

Therefore, we want you to be the first one on the block to know about a hot preforeclosure deal as soon as it is listed on Foreclosure.com.

Sign up to receive FREE email listing alerts today and let us do all the work — all you have to do is sit back check your email inbox from time-to-time for amazing preforeclosure deals in your area.

It's that simple.

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Hot off the press

Help is on the way

The big news the last few weeks has been all about the "economic stimulus plan" that President George W. Bush announced to "spark" consumer spending with up to $1,200 tax refunds for certain households throughout the United States.

Part of that package includes a big break on mortgages, making it easier to purchase or refinance homes in high-cost areas, according to the San Francisco Chronicle.

Here's a snip:

"Besides its core purpose of providing tax refunds, the tentative package — which still has several hurdles to clear — essentially rewrites the definition of 'jumbo' loan, raising the cap from its current $417,000 to as high as $729,750 in high-cost areas for one year."

Basically, it all means that homebuyers could qualify for mortgage loans through government-sponsored entities such as Freddie Mac and Fannie Mae at much better interest rates (up to one point lower than prime).

For example, the report indicates that on a $650,000, 30-year fixed-rate mortgage, the savings could be $417 a month, which is a significant chunk of change if times are tough.

This move is intended to stabilize the market in areas that perhaps were overpriced two or three years ago and property values are beginning to correct.

In short, it's good news for new homeowners, but it may not bail out those already in trouble with unaffordable adjustable rate loans.

That's because these homeowners are more than likely upside-down on their mortgages (they owe more to lenders than the properties are actually worth), meaning that it is possible that more homes will enter the foreclosure and REO stages.

Therefore, keep an eye on this situation. As an investor, this could be a fantastic way to purchase a nice home in preforeclosure, secure a great interest rate, and help someone out of a bad spot.

Good luck!

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Our success stories

A lifetime lesson

When he first heard that it's possible to make more than $80,000 on a preforeclosure deal with just a $10 contract, Foreclosure.com Three-Day One-on-One Real Estate Training Retreat student, Jean Aristide, was skeptical.

"It just didn't sound right," said the Lauderhill, Fla., resident. "It seemed like a far-fetched hoax. Fortunately, I could not have been more wrong."

That's because esteemed retreat instructor and renowned investing expert, Lance Young, has been buying and selling preforeclosure real estate this way for more than 20 years. He's an integral member of our teaching team and a big reason many of our students go on to collect handsome real estate investing profits.

In fact, testimonials from his students show that with no experience, people have made first-time profits of $11,000, $31,000, $80,000 and more just by following his simple guidelines.

"Lance has a quick, easy-to-understand and lucrative approach when it comes to preforeclosures," said Aristide. "It's perfect for someone like me who is just starting out in this business — very low risk and extremely high reward."

According to Lance, an investor needs no more than $10 to make a deposit on a preforeclosure home (in distressed property sales deposits tend to be very small). The rest of the payment, which is agreed upon in a contract that the investor writes up, is guaranteed at settlement.

For example, if an investor negotiates to give a preforeclosure homeowner $5,000 cash for the equity in his or her property, he or she should expect to get the remaining balance ($4,990) at the closing table — an arrangement that most distressed homeowners agree to more often than not.

Investors are encouraged to remain steadfast and not be tempted to offer much more of a deposit just because the homeowner may complain about getting $10. There needs to be an incentive for the seller unload the property and vacate it at or before settlement. The more money that is guaranteed up front is more money that preforeclosure buyers have to worry about never seeing again. 

"There are two reasons for offering such a low deposit," said Young. "First, $10 is perfectly legal to offer as a deposit to purchase a home. Second, 99 out of 100 homeowners do not know you need to give them a deposit at all. Therefore, why risk any more than $10?"

In short, giving the homeowner a $10 deposit will make the transaction legal while also limiting your risk.

Having said that, it's reasonable to expect that some negotiation on the price point will take place from time to time. However, if a seller continues to balk, don't get carried away — use sound judgment during negotiations to work out the best deal.

"It really is possible to close amazing deals with just a $10 bill — it's how I make a living!," said Young. "You don't need good credit, and you don't need to spend a lot of time at it.

"In fact," Young concluded, "during the retreat you get all the knowledge and tools you need to make big profits with preforeclosure homes ... guaranteed."

So how does an aspiring investor with little to no experience go from $0 to $80,000 in a matter of days?

"It's a process," explained Aristide. "And once you understand that process, everything just falls into place. Of course it takes some effort, but the more you do it, the easier it becomes."

From analyzing potential preforeclosure deals to negotiating with homeowners to writing up the actual contracts, Lance covers the entire "process" from soup to nuts during the Foreclosure.com Three-Day One-on-One Real Estate Training Retreat.

It's a lesson that lasts a lifetime and pays future wealthy real estate investors back in spades over time.

Just ask Jean.

For information on the next Foreclosure.com One-on-One Real Estate Training Retreat click here.

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Real estate tips

Preforeclosure letter writing 101

Last month, we dedicated an entire section of the newsletter on the importance of pounding the pavement, knocking on doors and talking with homeowners in preforeclosure directly.

Of course, there are other ways to contact homeowners in preforeclosure such as letter writing and over the telephone. Let's talk a little bit about the former ... we'll touch on preforeclosure telephone strategies next month in the March newsletter.

Contacting homeowners in preforeclosure is perhaps the most important step in this entire process, as well as the area in which many investors struggle.

Some investors mail letters to all of the preforeclosure owners in their cities. This blanket approach, however, is not effective for most independent investors.

Instead, think quality rather than quantity.

Focus on identifying several zip codes that you are interested in making an investment and eliminate all those properties not in those zip codes.

The reason for this is simple: It's virtually impossible to become a smart real estate investor in several areas unless you have unlimited time and resources.

Once you have mapped out your general territory, the next step is to create professionally-written letters that are personal and compelling — "stock" or "generic" letters will simply be tossed in the trash.

For example, talk a little bit about yourself, the reasons you are interested in a specific home and the ways in which you plan to help the homeowner out of his or her situation.

If you are a terrible writer, definitely find and pay and experienced writer to compose your letters ... it is well worth it in the long run.

Think about it: This is a money-making business and any small investment you make in it will help guarantee its success.

Don't be discouraged if you don't hear from anyone after making contact with owners by mail. Most preforeclosure owners are in a state of denial about losing their homes. For this reason, you should contact them on a regular basis.

For best results, contact your database of preforeclosure owners once every week or every other week with original letters — no form letters or postcards. Each letter should reference the previous and should be slightly different. All letters should be individually signed and mailed with a first-class postage stamp.

Again, letters should appeal to the emotions of the preforeclosure homeowner because this is a difficult time for them. Accordingly, your stance should be one of wanting to help.

Make it clear how you can assist them, including offering cash for their equity, finding them a new place to live and keeping them from having a foreclosure on their credit history — something that could make it extremely difficult to qualify for a home loan for up to seven years.

The main goal is to keep your name and phone number in front of the troubled preforeclosure homeowner as much as possible so that when they are ready to ask for help, they will contact you.

If you have selected an area and home with high resale value, and you have negotiated with the homeowner so you net a nice sum on the deal (don't get greedy) while helping the homeowner get a fresh start, you both win.

The best deals always help out the buyer and the seller. That's the preforeclosure way!

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