January 2008

Investment Exchange

An educational real estate newsletter

Preforeclosures from A-Z

(Part I of III)

Part I  |  Read Part II  |  Read Part III

In a previous edition of "Investment Exchange," we focused on preforeclosures — a lucrative real estate investment technique that is perhaps the smartest and safest option available to experienced and first-time investors alike.

Let's begin with a little refresher:

During preforeclosure, a property still belongs to the homeowner, but the lender has initiated legal foreclosure procedures because payments have not been made and the loan is considered to be in default.

There are basically three things that can happen at this stage for a homeowner:

• "Cure" the loan and make payments to become current and remain in the residence
• Sell the home before formal foreclosure proceedings to an independent investor/buyer and payoff the outstanding loan balance
• Lose the home to foreclosure and all the money tied up in it (if applicable), as well as significantly damage his or her credit

So what makes these deals so great?

Well, first and foremost it's not unreasonable to find preforeclosure deals for up to 50 percent less than current market value on Foreclosure.com. In addition, these transactions often happen fast because of the looming foreclosure action.

Indeed, timing is on the side of the investor/buyer, which is a powerful bargaining chip during negotiations.

We plan to delve into this topic in great detail over the next three editions of "Investment Exchange" in an informative three-part series. And that's all because we feel strongly about the massive benefits and financial rewards of preforeclosure investing.

In this installment, we will discuss how to find good preforeclosure deals before the "competition." From where to find potential investments to how to analyze them, our goal is to give you the tools you need to get on and follow the preforeclosure scent.

One quick hint: It smells like money.

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Site feature spotlight

Analyze preforeclosure deals fast

Thanks to a strategic partnership with Zillow.com — an online service dedicated to helping people get an edge in real estate — Foreclosure.com features a "Zestimate®" on nearly all of its 1.8 million nationwide listings.

What's a Zestimate®?

Zestimate® is an estimated market value for a home provided by Zillow.com. It is not a professional appraisal.

The figure is computed using a proprietary formula and will often be within 10 percent of the selling price of the home, according to the Web site.

Why is that important?

This is a helpful valuation tool that let's you compare a home's estimated value to the asking price. For example, if a house is listed on Foreclosure.com at $200,000 and the Zestimate® is $375,000 that means there is huge profit potential — to the tune of $175,000.

Clearly, the bigger the difference, the better the potential deal.

In addition, Zillow.com provides comparable listings in the surrounding area, which means that you can get a better feel for the actual value of the homes in the neighborhood.

It's not an exact science; however, comparing the asking price and Zestimate® differences is a fine way to quickly analyze preforeclosure deals and flag them for further follow-up. In fact, we make it even more convenient with our "Saved Listings" feature.

How is it possible to get started analyzing preforeclosure deals?

Visit Foreclosure.com and search an area via state, listing ID or zip code for available listings and results will appear for each query. From there, click on the properties that you want to learn more about.

On each listing "Details" page the asking price will be located at the top of the page in orange font color. On the right of the page (below the listing photo) the Zestimate® will appear in green font color.

Once you have a solid collection of leads then it's time to scrutinize them further, make some calls, visit properties and begin the negotiation process ... all of which we will address right here in future editions of "Investment Exchange" during our three-part preforeclosure series.

Stay tuned. In the meantime, good luck spotting those preforeclosure deals!

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Web site search tips

Know state foreclosure laws

Foreclosure.com maintains a library of invaluable foreclosure-related information on its Web site, providing visitors with the most accurate distressed real estate listings on the planet and vast resources to help them along in the process.

Not too long ago we added "Foreclosure Laws" for each of the 50 states, including the District of Columbia and Puerto Rico, as well as detailed information on "How to Buy Foreclosures," to our industry-leading Web site.

The fresh content helps investors make smarter property purchase decisions.

We're highlighting this feature today because foreclosure laws vary state-by-state. That means the window of opportunity to capitalize on preforeclosure deals in Texas, for example, is different than in California.

More than likely, homeowners in preforeclosure will sell their homes at discounts, or at the very least, for the amount remaining on the loans because it is usually only a matter of time before the home is repossessed.

And proper timing is the most important element of successful preforeclosure investors — it makes all the difference in the world.

From spotting the hot deals early to using the looming foreclosure action to your advantage, proper timing is critical when it comes to preforeclosures.

"Foreclosure laws differ from state to state and a step-by-step process on how to buy these properties is hard to find," said Brad Geisen, Founder, President and CEO, Foreclosure.com. "We've gathered all of this information and made it available conveniently in one place on our Web site."

Leveraging the "Foreclosure Laws" section, a Foreclosure.com visitor can easily access information that directly impacts his or her purchase of a preforeclosure property in a particular state/territory, including:

• How trust deeds/mortgage liens are treated
• How mortgages are foreclosed
• The legal instruments that establish a mortgage
• The amount of time it takes to foreclose a property
• If a "Right of Redemption" clause exists in a state
• Whether or not deficiency judgments are permitted
• The statutes that govern a particular state's foreclosures

Within the next few months our goal is to enhance this section and make it even more helpful.

For now, just click on any state from the Foreclosure.com homepage to access the "Foreclosure Laws" for that state. In the left sidebar there is a link to the laws located in the box labeled, "Learning Center."

Happy reading!

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Hot off the press

Preforeclosures
are a 'win-win'

"There is little risk involved with purchasing property during this stage [preforeclosure] and you can also enjoy the satisfaction of helping someone get out of a bind, though you need to make sure there are no judgments or liens on the property before you finalize the deal."

This brief statement in the "American Chronicle" is perhaps the most attractive aspect of preforeclosure investing outside of the huge potential financial returns.

Put simply, working preforeclosure deals should never be just about dollar signs. It's an opportunity to help people in despair, as well as yourself, if done right.

In fact, when canvassing neighborhoods and knocking on doors with the leads that you get from Foreclosure.com you'll soon learn that people skills and the right approach will be invaluable.

Here's the reason: Distressed homeowners are more than likely being approached by interested investors from all angles, whether it's in the mail, on the phone or in person. Those who are overly aggressive and insincere will be less likely to achieve success.

Put yourself in the homeowners shoes and formulate an approach, conversation and tactics that you would find appropriate. Practice these in the mirror or with a relative, business partner or significant other — even if it feels uncomfortable.

That's because it will feel more uncomfortable out in the field. The good news is that over time the process will become second nature and you won't even think twice about it.

Keep in mind that, as mentioned above, there are other ways to contact homeowners in preforeclosure such as letter writing and over the telephone. We'll go over them all in the next edition of "Investment Exchange."

We encourage, however, face-to-face interaction because we know it works and often produces the best results ... financially and morally.

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Our success stories

Coulda, Woulda, Shoulda

The testimonial below is from an aspiring investor who attended a recent Foreclosure.com Three-Day One-One Real Estate Training Retreat. For more details about how to enroll in the comprehensive educational course click here.

With two kids, a wife, full-time job and two part-time gigs sandwiched into his hectic daily schedule, Tom M. froze when asked about his hobbies during the most recent Foreclosure.com One-on-One Real Estate Training Retreat.

"I guess I don't really have any," he said. "That's the reason I'm here, so I can live a comfortable life and provide for my family without killing myself in the process."

Message understood ... loud and clear.

Time — or lack thereof — is the most common excuse that "wannabe" future investors offer up when confronted about taking the initial steps to get involved in real estate. In fact, the first step is the most difficult.

And fortunately for Tom, the fact that he was sitting in our Boca Raton, Fla., headquarters for an intensive three-day training experience signaled that he has crossed over the threshold once and for all.

It had been seven years in the making.

"Prior to the birth of my daughter I toyed with the idea of investing in a few properties," said Tom. "I never did ... and it was one of the biggest mistakes that I ever made."

At the time he was living in Hoboken, N.J., which was in the process of an all out renaissance from industrial hub to trendy hot spot. He was engaged and renting a two-story brownstone (with his friend) that was ideally situated near the public transportation facilities that crisscrossed the Hudson River each day into New York City.

His share of the rent was $800, which included all major utilities. All told living expenses could not have been more than $1,000.

"It seemed like a ton of money at the time," he said. "But looking back on it I was just not being smart with money. I probably could have afforded a much higher payment if it came down to it."

And it did.

Tom's landlord informed the pair that he was putting the historic residence up for sale within the next few months for an asking price of $299,000. He revealed that if Tom and his friend wanted to remain in the home they'd either have to work out a new deal with the future owner prior to sale or purchase the home themselves.

"We didn't think about buying it until he mentioned the possibility," Tom said. "It was intriguing, but it seemed like a lot money and I was getting married in the next year. It didn't seem like a good fit.

"The final nail was when I realized it would be difficult to secure the down payment," Tom added. "In hindsight I didn't try hard enough. And it's a mistake that still haunts me today."

According to Tom, the owner received several offers as soon as it hit the market and was eventually sold for more than $325,000 — $26,000 more than the initial listing price. That same property, Tom estimates, is now worth more than $500,000.

"It's crazy," he says. "It could have been mine. Now that I have a family I realize how important an investment like that could have been for our livelihood. It's a decision that I want to go back and correct."

That quest for redemption began during a recent Foreclosure.com training retreat, which is a LIVE hands-on real estate learning experience.

From walking through actual foreclosure properties to role playing to analyzing potential deals, the three-day educational course is modeled after Foreclosure.com Founder, President and CEO, Brad Geisen's, money-making investment system.

It's a session that has Tom off and running right out of the gate.

"I'm working on a few deals now," said Tom. "And I owe all the confidence, preparation and insight to the Foreclosure.com retreat team. It's been a hard road these last few years and I'm just now beginning to see the light at the end of the tunnel.

"The phrase 'good things come to those who wait' doesn't apply in real estate," concluded Tom. "The more you wait, the more you miss out on. I'm now in this knee-deep and couldn't be any happier. Well, actually, I'll be happier when I have enough money to go back and buy that property in Hoboken. I'm on a mission."

Good luck Tom, anything is possible with the right knowledge and direction. We know firsthand ... and you will also soon.

Real soon.

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

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Real estate tips

Investors: Keep an open mind

It's important to find your niche when it comes to real estate investing, meaning that it's paramount to settle on a technique that fits your personality and skill set.

In short, some people excel in areas where others struggle and vice versa.

The philosophy also holds true with the preforeclosure niche. There are several ways to go about preforeclosure investing, from flipping to rehabbing to renting.

It's a niche within a niche.

Investors are creatures of habit and often stick to the same routine over and over. Now there's nothing wrong with that ... especially if it is profitable.

However, we strongly urge you to keep an open mind because in this business things can and often do change rather fast. And the more possibilities and scenarios with which you are familiar, the more flexible and comfortable you will be no matter what curveball comes next.

For example, expert Lance Young has more than 20 years of successful experience buying and selling preforeclosure real estate. He is often the featured speaker during select Foreclosure.com 90-minute live online Webinar presentations and he is an integral member of our Foreclosure.com One-on-One Real Estate Training Retreat expert team.

Lance has seen and done it all, including making up to $80,000 and more on preforeclosure deals in literally days with just $10 deposits. He doesn't, however, always go out and look for those kinds of whopping deals.

Why?

Because sometimes it's like trying to fit a round peg in a square whole ... it's just not a good fit. No two deals are ever exactly alike.

The difference is Lance can adjust to any situation because he has the tools — and an open mind — to do so.

It's a difference that is worth its weight in gold. Literally.

Note: To check out the Foreclosure.com preforeclosure training Webinar with Lance Young it is available via On Demand at any time at reduced price. CLICK HERE.

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