Episode 7 | How To Find Pre Foreclosure Leads

Hello, welcome back to the New and Experienced Investor Podcast. I'm one of your hosts, Alex Barnett.

And I'm Joe Homs.

Today, as you may notice if you're watching on YouTube, we have a very special guest. I'm thinking we just have to come out and say it right off the bat. It's a big get for us.

Yeah, the Donald's here today. His Secret Service agent staff is outside watching, make sure everything's secure at our location. And he just thought he'd drop by and, hey, Alex, how you doing? You know, and Joe, how you doing? So he's, he's probably going to be pretty silent during the entire podcast, but we'll look over there every once in a while and see how he's approving of what we're saying.

Yeah, I think he said he just mostly wanted to produce the show today. So, but today is— it's very— I like this topic and it's one of the better performing topics on your channel. So I figured we could kind of talk about it on the podcast. How to find pre-foreclosure leads. That was one of the deals that we just did recently was a pre-foreclosure. These are motivated sellers. These are people who, as you say, are raising their hands saying, I need help. How do we find these people? So we're going to go over 3 different ways. Before we do that, you guys, please share this podcast with your friends, with your family, anybody who's looking to get into the investing world, the real estate investing world. Subscribe on YouTube. And if they have any questions, they can reach out to us directly for some one-on-one help.

Sounds great. All right.

So let's jump on into it. You want to go over number 1?

Uh, yeah, sure. Number one, um, you know, what, what I use, what tools I use.

Mm-hmm.

Um, I've been using PropertyRadar, uh, for many, many years now. It's been probably around 10 years using PropertyRadar. PropertyRadar is a company that literally goes to, um, the recorder's office in a local jurisdiction and gets all the notice of defaults that are on file and where they get these notice of defaults. So when a homeowner stops making their mortgage payment, the process here in California takes about 3 months and 21 days. The first official letter that goes out and gets recorded at the recorder's office is called a notice of default. And this notice of default basically puts everybody on notice, including the homeowner, that they've stopped making their mortgage payment. And that is literally just an easy way to find out who's not making their mortgage payment and reach out to them in several ways that we're going to talk about. The other company that is about the same and I use them as well, is PropStream. And PropStream does the same, same thing, same information. They've got maybe a little bit, a couple more little tweaks here and there that they do. But we also use these 2 services to pull lists of the homeowners that are having difficulty with, you know, their mortgage, and we reach out to them.

What about— I mean, they're pulling the county records. Can you just go down to the county yourself?

Yes, you can.

Okay.

And that's the way we— I started out. And literally, you go out to the county records and you could literally spend a day there. And I'm going to mention a word that if you're a millennial or below, you probably Not even going to know what I'm talking about. But when we used to go down there, we used to have all these documents and they were on microfiche.

Hmm.

And microfiche is just basically like, like when you, when you, when you take a photo of something and you have the photo and you have— anyways, it's, it's old-fashioned. Yes, you can go down there, to answer your question, and yes, you can file through their records that are electronic now.

Okay.

But it's just like, why would I spend my time, you know, down there doing all this stuff when I have a company that I pay, you know, $79 to $100 a month that does it for me? You know, I just— my time's more valuable than just sitting there trying to get this information for free.

Yeah, they've, they've already done it for you. And one thing I like about the filters is you can You can see who has auction dates coming up as well. So if they have a trustee sale that's, you know, 30 days out, you can filter it by that. And you kind of know these people are on a ticking, you know, sort of timeline. So you can reach out to them, you can do the door knocking. So I know with these people, they're getting hit up by a ton of other, you know, not just investors, but also real estate agents, Creditors, all sorts of people. So a lot of times they're ducking your calls, they're ducking your texts. So if you want to get that list and just go to their house and knock on the door, that's also, you know, a great, a great way to do it. But it starts with that list, with that information, with those leads.

Correct. Yeah, yeah, that's going to be your best source and your most current information that you can get without actually going down there And, you know, searching by hand.

Yeah, yeah, those are great. And I think PropertyRadar kind of started out as the pre-foreclosure aggregate of all that information.

Correct, yeah. Yeah, and the other thing PropertyRadar does is it tells you during the process, it, you know, it follows the process and it tells you when the auction's going to be. When I was buying at the courthouse steps, that's exactly what we would use. Wake up in the morning, we would see what the auction list looked like that day, get in the car and start driving to properties to see if any of them were interesting enough for us to put a bid on.

Wow.

And then after that, you'd knock on the door, you'd try to get access to the property, you'd peek in windows. You know, just trying to get that little bit more information than, than the next guy.

Mm-hmm.

Because, you know, most of these properties, in fact, all of them are, are bought sight unseen unless you find a tenant or homeowner in there that's going to let you go inside. And that gives you a little bit more of an edge because you can bid a little bit more on the property than the next guy because you've already seen the inside of it. But like I said, most of the time, probably, you know, 90% or more of the time, it's— you're buying something sight unseen. So you have no idea what's going on inside the house.

Crazy.

Yeah.

Did you guys ever buy a property where you— I mean, I guess you build that into your numbers, but did you ever buy a property and it was way worse than you thought it was?

Um, we were buying properties in Orange County, so the You know, we didn't run into a lot of that. I know one of my investors who I was listing his foreclosures for bought a property with some foundation issues.

Mm-hmm.

And you're right, you just work those into the numbers. And that's why if you ever get a property in, in a foreclosure sale, you're probably going to be paying the least for it because of that reason, because people don't know what's inside. So you kind of have to build those numbers into it. And so, um, it was, it was some foundation issue, but it was just minor. It wasn't, uh, anything major that couldn't be repaired. And it was repaired, it was disclosed, and move on.

What about the trustees themselves? Do they have websites or anything that list off The auctions or the sales, or is that you're going to get the same information through PropertyRadar and PropStream?

Yeah, the trustee is working for the bank.

Okay.

So they're like the bank. You call the bank and ask them any information about a particular property. Are you the homeowner? No. Uh, yeah, we can't give that information. That's private information. So the trustee's the same thing. Uh, the trustee has all the information. They show up to the auction. Um, they can, you know, say, okay, the bank has instructed us to start out at this price, you know, do I hear any bids? Or they can say, yeah, the bank said that they're going to postpone it for this month because, you know, they're trying to sell it. You know, they filed bankruptcy. There's lots of reasons to postpone a trustee sale. And, you know, you can have the homeowner call and, and usually they do it once. So, you know, they're cooperative and they say, yeah, I'll— we'll postpone it if you have somebody that's going to buy it within the next 30 days. But if not, then they try not to postpone it. Guaranteed that if you file for bankruptcy, it has to automatically get postponed.

Hmm.

And that usually takes about 30 days or more for the bank to actually have an attorney that they hire to go into the bankruptcy court and say, you know, sorry, he owes us this amount of money. There's not much left there. We need you to remove it from the bankruptcy court. And they do that all the time.

Okay, but that doesn't stop the foreclosure, right?

No, I mean, that postpones the foreclosure for 30 days or, or more until, again, the bank attorneys go in and remove it from the bankruptcy court. And then, um, and then it's, you know, they're free to foreclose on it after that.

Wow.

So it's, it's just a stalling tactic.

Yeah.

That, that's used.

Okay. And I mean, a lot of people that we've reached out to, they say they have an attorney. You know, I've taken care of it. I've reached out to an attorney. What, what are these attorneys doing for them that, you know, just an investor can't do?

Well, I guess I have to be a little bit careful here because they are attorneys. They, they, you know, they're attorneys, so they're giving them the legal advice.

Okay.

And that's, that's basically what they're doing. They're charging them for legal advice. Um, is it any different than an investor can do for them? Uh, other than, you know, filing, um, bankruptcy paperwork at the bankruptcy court, um, an investor actually can do that. You know, same thing that an attorney can do, just file paperwork. It's not any different. And it's just, again, it's just a stalling tactic.

Okay.

So, you know, you kind of hear these stories that hire an attorney, they'll sue the bank and do all that stuff. I've— I mean, of course, there's probably 1 or 2 cases out there with that where that's worked, but very rarely does anything like that work.

Right.

At all.

Okay, gotcha. All right, maybe let's move on to number 2, which is wholesalers. So if you're on— if you're a buyer, if you're a flipper, if you're just an investor and you're not going out there and sourcing your own leads, you can get on what's called a buyer's list where wholesalers will work— they'll, they'll get the leads, they'll work the seller, and basically Get, get it all locked up and, um, you know, put it in a package that they then sell to an end buyer. Um, you have everything in-house now. Are you still working with wholesalers, or what are your thoughts on that?

Um, I, I'm pretty much on every wholesaler list out there, and so I see everything that comes, uh, across that's emailed to me, right? And what I'm seeing now are deals that you know, are presented. And then a few weeks later, I see price reductions, which is the same thing that's going on with the real estate market, real estate agents, MLS, all that stuff. Same thing that's happening. Nothing different.

Right.

The wholesalers, in my opinion, got a little bit greedy about a year ago when the market was just, you know, shooting up to the moon. And some wholesalers were making $75,000 to $100,000 per deal when a normal wholesale deal could have been anywhere between $5,000 and $20,000.

Mm-hmm.

I don't think that you're seeing a lot of that anymore. If anything, you know, they lock up these deals and they put them under contract, they deal with the homeowner, and then all of a sudden 30 days goes by because that's what their contracts are usually for and they haven't sold it to anybody. And so, you know, their options are start reducing the price, call the seller back and, you know, get a reduced price on what they had it for. Or, you know, sometimes they just cancel the transaction and say, sorry, we couldn't do anything for you.

Right.

And that's if they're actually telling them everything about what they're doing and wholesaling. You know, when, when you sell to a wholesaler, you have to be careful that you're selling to somebody that knows what they're doing and that they can actually perform at the end of the day.

Right.

Because sometimes they don't.

Yeah. And I guess when it comes to, you know, pre-foreclosure situation, hopefully that wholesaler knows what they're doing, can at least postpone the sale. But, you know, if it comes down to it and they can't perform, then the seller's pretty much in the same situation where they don't have, you know, a purchase and sale agreement that is actually going through. So like, like the one that we got recently, I mean, it was pretty much we had to perform right away. If I had— if we had to go out and try and find a buyer, which we probably could have, it would have just maybe, you know, might made a really sticky situation for the seller.

Yeah. Yeah. So, you know, for you sellers out there that are looking to sell your homes for all cash, you know, like everything else in life, there's the good, the bad, and the ugly, and make sure that you're dealing with somebody that knows what they're doing and is able to close on this transaction for you. Because especially with a pre-foreclosure, you know, if you end up wasting another 30 to 60 days, you may actually get foreclosed on. And the wholesaler, you know, unfortunately doesn't care at the end of the day. It's your property. He just, you know, he or she couldn't sell it. So—

Yeah.

Just, just make, you know, make sure that, you know, you're dealing with somebody That's reputable.

Exactly. Yeah, I think it's just with anything, it's creating that relationship, vetting the wholesaler, and, you know, just— and you as a buyer being able to show that you can perform and, you know, get, get on the top of their list. Yeah, most likely they're going to want to go to somebody that they know can, you know, come through too.

Yeah.

So, yeah, awesome. Okay, so let's jump into the 3rd way, which is Agents that specialize in short sales or, you know, pre-foreclosures?

Um, agents are always an option, and again, it depends on which agent, which person that you're working with. Do they know what they're doing? Do they know how to set up these deals? They're probably doing the same thing. They're cold calling people and saying, you know, hey, You know, sorry to hear that you're not making your mortgage payment, and how did you hear about that? It's all public record, you know, so it's not a secret or anything like that. We're not going to a secret room and, you know, getting it. Don, I think, invited us to the, you know, the White House one day and brought us down to the secret basement room where all the nuclear codes and stuff are at, but it's not like that. It really is. It's open, aboveboard. You know, all the information there is public. So dealing with real estate agents, knowing that they know how to do short sales and knowing that they're investors themselves, which means that they either have investment properties or own their own home. Simple as that, owning your own home. You'd be surprised how many real estate agents don't own their own home, but they have a license to sell. other people's home and give them advice on investing and all that. So you have to talk to them. You have to, you know, ask all these questions of them. You know, how experienced are you? How long have you been doing this? Do you invest in properties yourself? Do you have any buy-and-holds? Do you flip properties? What is it that you do? You know, oh, I'm an expert on short sale. Look, great, awesome. So next time you get a short sale, please give me a call. And I'm happy to put an offer for you. And they like investors because the investors stick around. If they put this on the market and they sell it to an end user and, you know, short sales used to take months, it doesn't take that long anymore, but it used to take months to close on a transaction. You know, 2 weeks later, this buyer's already looking at something else.

Mm-hmm.

And maybe they're in contract on another property in 30 days and they didn't notify the short sale agent that, you know, they've gone and purchase something else.

Mm-hmm.

So they've gone through the process, they've gotten the approval from the bank. The bank says, we're ready to go. The short sale agent reaches out to, um, the buyer's agent or the buyer directly, and they say, oh yeah, we, we bought something 4 months ago. Sorry, we didn't tell you.

Mm-hmm.

You know, investors are not like that. Investors are, are there until you're ready. You know, they've got the cash sitting on the sidelines ready to go. That, uh, okay, so what, it takes 4 months? Let me know. 4 months, you call me and you've gotten, uh, the price approved that I submitted it over there. Okay, I'm ready to go. You know.

What, what is a short sale exactly?

So a short sale, um, is, for example, you purchased a property for $500,000. And, uh, back in the day of 2008, um, right before we had the crash, the banks were out there and they were giving 100% loans. You know, I used to call them warm body loans. If you had a warm body, they'd give you a loan. And so you purchased this property for $500,000, you have a loan on there for $500,000, and then all of a sudden 2008, '09, and '10 came around. Now that property is worth $250,000. So the only way to sell this property as a seller is to do what's called a short sale. So You have $500,000 purchase price, you have a $500,000 loan, but you can only sell it for $250,000, which means that you're short $250,000. And the bank has to agree to let the real estate agent sell that property at $250,000, which means they're losing $250,000. And that's what a short sale is. Okay.

And so the agent will reach out to the lender and set all that up and basically get You know, an approval to sell.

Correct.

Okay.

Correct.

Okay, gotcha, gotcha. Hmm. And so I figured that, I mean, and, and I think you said you went through a whole, uh, period where you got really good at short sales and had a ton of those. Um, and so that's a sort of a niche that some agents can jump into. So it'd be wise to maybe get leads from those sort of people?

Yeah, what I used to do is a lot of door knocking. So I'd literally go find out who was having difficulty making their mortgage payment, and I'd knock on their door and I'd, you know, introduce myself and, you know, what do you plan on doing? You know, there's really not, not much of an option here. It's like, okay, why did this happen? Well, I lost my job. You know, I had a family emergency, or whatever it was, whatever the, the, the reason was that they stopped making their mortgage payment. You know, if you can resolve that quickly, fine, you're, you're quick. But like I said, a 3-month and, you know, 21-day process here in California doesn't give you a lot of time to resolve these issues. So, um, I'd ask them, okay, well, if, if we're not going to resolve this in, you know, 3 months and 21 days, Then how about, you know, I get you out of this mess? Because remember, you, you know, as an investor, I wouldn't want to buy this property. It's worth $500,000 when they have the loan on it, but now it's only worth $250,000.

Mm-hmm.

So the only way I would buy it is if I would put an offer in at $250,000 and then go through that process and let the bank approve it. So that's kind of the process that we went through at, at during that period of time.

Right.

A lot of— I mean, I spent a lot of Saturdays and Sundays literally just in one community just knocking, knocking on doors. And it was— I don't want to say it was nice. It was easy for me because I would go into like a condominium community that had 1,000 condominiums and they were all like literally in walking distance. I'd park my car and I'd literally just start knocking on these notice of default doors. Half of them, half of them were in foreclosure.

Oh my gosh.

Okay. Yeah, it was that crazy. So it's not like I needed to drive from here, you know, over to the White House and then over to Oregon. And, you know, it's like I'm exaggerating, but I don't need to drive long distances like I may have to do now because there's not a bunch of these foreclosures. And that's a great question. You know, Is that coming back again? You know, you see that a lot of these big companies are laying off people left and right, especially in Silicon Valley and stuff. And who knows, it may start to come back again.

Yeah. So yeah, maybe start reaching out right now. Get those relationships as far as leads. If you're not going to pull your own leads, reach out to wholesalers, let them know you're looking for those sort of situations or agents as well, because I know— I think on— you can go on Zillow and look for an agent that specializes in short sales or whatever. So yeah, maybe you could reach out to them. And, you know, depending on what happens as far as our economy and jobs and everything, seems to be a new headline every week.

Every day, every day, every hour.

And we're— yeah, it's hard to tell.

A bank goes bankruptcy. And, uh, 97% of the depositors have more than $250,000 in deposits. And, you know, in a, in a normal, normal financial environment, these people would be out that money. You know, FDIC guarantees to $250,000 and that's it. But no, you know.

Yeah.

Here we are, you know, uh, during this regime and They've all been bailed out at this point, you know. So like, uh, any bank that goes under, it's just the federal government gonna bail them out, you know. I don't know. I don't know. It's like, wow. I mean, if you've done it for one, why, why not do it for everybody?

Yeah.

You know, it's, it's a little bit scary, you know, because they're picking winners and losers at this point, right?

Yeah, interesting. So definitely, uh, we'll keep an eye on it and keep you guys updated. Is there anything else, um, you want to add to the, to the pre-foreclosure leads sort of thing?

No, um, like I said, most of the time I get them from PropertyRadar and PropStream. Those, those are going to be your best sources of getting those type of leads. And then, you know, cold calling them, texting them, knocking on doors is still Still good. We're, we're done with COVID So, you know, people aren't going to be afraid to answer the door.

Right.

So knock on the doors. I usually like to door knock on Saturdays and Sundays, Saturdays in the morning, because I pretty much know everybody's home in the morning on Saturdays. And then Sundays in the afternoons, because I know everybody goes to church on Sunday. So they're back in the afternoon, you know, watching a football game or whatever. So those are the 2 times and 2 dates that I use. I usually like to door knock. Never went during the week because People are at work.

Yeah.

So you're kind of wasting your time.

Yeah, definitely. Yeah, I had a— I only— I've been door knocking a couple times and ran into, yeah, one or two people that needed help. And, um, I think one guy ended up actually making a deal with the, with the lender, so he wasn't behind too much. But yeah, it's definitely— it's, it's a good way to get in front of them because, you know, like we mentioned earlier, a lot of times they're not— they're so bombarded, maybe they have their head in the sand, they're just You know, ignoring the, the mailers, the texts, the calls, but it's kind of hard to ignore somebody that's on your doorstep.

Yeah, yeah. And, and a lot of times they actually do ignore everything, you know. They just— they are putting their head in the sand. Uh, they're ignoring what's there, what's obvious. They're not getting good advice from whomever that they're speaking with. They just don't understand that the process is just a short period of time. You know, back in 2008, '09, when I was doing short sales, there were so many. It was taking me 8 to 9 months to get an approval from the bank because they were just inundated with this stuff.

Mm-hmm.

Nowadays, it's not, you know, unusual to get a response back from a bank in a couple of weeks. And the banks will counter you back if, you know, don't think that, you know, you're working with an investor You're trying to buy a property that's worth $500,000 and you're going to send an offer over there for $100,000. The bank's not going to approve something like that. They're going to approve something closer to that $500,000.

Mm-hmm.

And, you know, they may, they may actually say, well, you know, we're not going to, you know, approve anything because we think we can probably get the same price at the courthouse steps but not have to pay a real estate agent. Or an escrow or title, we're going to get all our money without any of that hassle of selling it to somebody in an arm's length transaction. So they, you know, they're pretty sophisticated nowadays. They do evaluate all that stuff.

Right.

Okay.

If you guys have any more questions, you can go on to Joe's YouTube. He's got quite a few videos on there regarding pre-foreclosures, investing during a recession, or you can reach out to us one-on-one. We— I have all the links. They should all be working in the show notes. So yeah, reach out to us and please share this video far and wide with all of your friends, anybody looking to invest in real estate. And anything to add?

No, I don't. And, you know, sorry Don didn't have a lot to say, but— and that's really unusual for him, right? Yeah. You know, he doesn't have a lot to say, but The Secret Service is, you know, kind of outside and they're guarding everything. And I think his attorneys at this point are basically telling him not to say much of anything, you know, because everybody's always after him for whatever reason.

Right.

So, but anyway, thanks, Don, for showing up. I appreciate it. You know, maybe in the future we'll have some more celebrities come by.

I love that.

And, and, you know, sit on the podcast with us. There you go. And talk with us. But yeah, that's, that's all I have. You know, if, if you're in Southern California, please feel free to reach out, uh, to me or Alex. And like he said, all our contact information is below. Feel free to reach out to us with whatever it is that you have going on and whatever help that you have, and hopefully we can get you started.

Perfect. See you guys next week.