Master Pre-Foreclosure Deals: A Proven Strategy!

What's up everyone?

Welcome back.

Today we're going to be talking about how to find deals and do deals with people that are going into foreclosure. Let's dive right in. Before we dive into how to do deals with people that are going into foreclosure, I want to invite you to my free masterclass. If you go to painlessflipping.com, painless is spelled like my last name, P-A-Y-N-E-L-I-S-S, flipping. We do a free masterclass every week where we show you exactly how to get started in doing real estate the painless way, where you can leverage other people's work and use their leads so you don't have to spend money on your own and you just have to bring the buyer. It's very simple and the process— well, I guess it is simple, but you do need to learn how to do it, navigate it so you can be efficient and not waste your time. So go check out painlessflipping.com, register, it's free. We'll see you on the masterclass. I want to talk to you about doing deals with people that are going into foreclosure. I've done many deals with people that are going into foreclosure. What it's called is pre-foreclosure or no notice of default. They've got a notice saying, hey, you haven't paid, you're going to go into foreclosure, and then pre-foreclosure as well, and then foreclosure is when they get foreclosed on and there's an auction date. So I interview an expert right now that's doing deals all with people that are going to foreclosure. He talks to them, he, he just calls them out and he just says, hey, look, I can tell that you're going into foreclosure, I want to help you out. And you know, a lot of times people say, oh no, I don't need any help, but he explains how he navigates the process and he even explains how he got started and how he did his first deal.

So let's check out this interview.

I think will really help you guys to learn how you can start and how you can get to where this guy is, where he's doing deals in foreclosure. And he kind of shows you the process. So let's dive right in.

So you came from the construction background. Now it's time to get your hands dirty. How did you get your hands dirty? How did you get that first deal? $10K?

Yeah. So I didn't like the growth trajectory that was happening in my primary business and how like it was, you know, you knew it was a pretty slow pace when you're working a W-2, right? So, you know, I started text marketing and within 3 weeks, I had someone that had positive connectivity and just walked him through my list of questions. And it was actually 2 plots of land that were side by side. Each one was so narrow that they could only be sold as a double, right? And we, you know, I put that under contract for maybe around $20,000, sold them for around $30,000. I had a dispo partner, somebody that I'd been collaborating with that helped sell the deal on the back end too. So, yeah.

Do you feel like that's a way that a lot of people start is maybe they find the deal and then they have someone help on the dispo side, like help sell the deal?

You know, to be honest, it's pretty overwhelming to do it all at one time by yourself and learn both sides of things. Like, it's almost like when you're doing it for a while, like for us, it takes a team, right? So to build it out, like, it's hard to have your hats in all these different places, particularly when you're learning, right? If you're learning acquisitions, how to build all that, and it's like, oh, now I have to learn how to assign it and do disposals. Acquisitions. It's a lot at one time, right? So I was really fortunate to have somebody in my corner to help kind of sell the deal too.

So yeah, no, I agree. And that's why, like, as you know my strategy, I tell people to kind of start at least with like a couple buyers to know what they want. So it's easy at that point if you find a deal to just give it to them, right? Because if you don't, you just do acquisitions and you kind of like, well, now I have 7 days due diligence, or 4, or 10, or 15 to find someone. It can be a really stressful thing to like try and figure it all out yourself because you don't really even think about that portion when you're doing acquisitions. You're like, "Let me just find a deal." And then once you do it, then you're like, "Oh shoot, I have little to no time to move this." Right?

Yeah. It's a good problem to have at the end of the day when you get to that step, but it is a stressful situation too to not have an exit strategy for the next step. But yeah, and like you're telling people, just find a couple buyers because it's very easy to get scatterbrained and focus in 15 different directions and not be definitive. And that's when you lose the most momentum in what you're trying to accomplish. Push, right?

Exactly. So let's talk about— so you did your first deal. Is there anything memorable about that deal you would like to talk about? Like, you found on text messaging, he just bought it. Anything that happened that you want to talk about before we hop into what you're doing now?

Well, it was surprisingly easy. It felt like I was cheating and stealing because of how easy the entire deal was. And I know you don't typically hear that, but for me, I did a lot of research. I listened to Wholesaling Inc. podcast for 6 months before I started, made sure I was prepared and everything. And then it just, it just happens. You know, I got a deal under contract. I was like, is this for real? Like, is this really going to close? Like, this isn't going to happen. And then I got, you know, $5,000, which is huge for someone that's just on fixed W-2 income. Right. So it was pretty cool. Like, they got the— like, it required its negotiations and a lot of, you know, other components. But, you know, it all works out in the end. So. Love it. Love it. Yeah.

So tell us, so you went from doing your first deal for $10K that you split, uh, 3 and a half years ago. Now you've figured out this awesome niche of working with sellers that are going to lose their home in foreclosure, correct?

Yeah.

Tell us about how you found that and, you know, tell us about how everything's going. Let the listeners know, um, kind of what the business looks like.

Yeah, it's going really well. Like, we, we always did a kind of more mass marketing approach and we never focused on a specific population or group of people. And we found that for this, like, like, we really enjoyed stopping foreclosures for homeowners and just being that conduit for people to have a different situation than the worst-case scenario, right? And so we saw that, and we've recently kind of made that our thing where that's all we focus on. And so we cut off everything else, completely cut ourselves off from other marketing methods. And it wasn't easy because it's nice to have your hand in so many pots, and that works for for some organizations, but for us, we just realized we wanted to be kind of the specialists and create that help in that with the market and where it's at right now.

So yeah, you're really providing value, right? Like, you really feel like when you reach out to someone that's in pre-foreclosure about to lose their house, like, hey, I'm the expert. I can help you out. I can help you keep this house. I can help you, you know, whatever options you give them.

Yeah, 100%. Like, our acquisitions guy right now, We talk a few times a day and he's emotional support for all of these homeowners. And, you know, I smile, but at the same time, it's very impactful because they are kind of living on an island and they've kind of given up hope. Right. And so we're able to kind of create that for them.

So that's amazing. So let's talk about how you find these opportunities. I'm curious, are you just getting the list from, you know, paid service? Are you going to the county? And then how are you reaching out to these these leads?

The county has the list and we reach out same way we always reach out by text and phone call and sometimes even door knocking. And we are just trying to shake the tree and ruffle feathers and talk to a decision maker at the end of the day.

So, and how's the reception? How do they receive you?

Usually mixed feelings. But if someone truly believes we're here to help them and that's that's our primary purpose, which obviously we make money, but motives align there, where, you know, we're able to stop a foreclosure from going on the record, and possibly even clean up their credit, right, which is huge. And they get to walk away with money in their pocket instead of just losing everything they've owned, then, you know, we are able to sometimes break down barriers there and help people understand that we're all kind of sitting on the same page.

So I love that. So when you reach out to them, do they say in defense, defense, like, I'm not selling? Is that like one of their things you have to overcome? Or do you work with the people that are like, yes, I need to move, there's something going on?

Yeah, we know they're not selling. That's pretty clear. We don't call them sellers, we call them homeowners. That's a big difference than traditional, right?

Right.

So, you know, we don't ask if they're willing to sell. We say, hey, we know your home's in foreclosure and we can help.

Okay, so you just straight up say— and because I know a lot of people when it comes to doing this for a while, like, they don't— sometimes they don't even want to bring it up, right? They just act like, oh, I was just calling you, you're on my list, or, uh, you know, they don't bring it up. So you bring it— you straight up bring it up?

Oh yeah, I mean, it's an elephant in the room. And if they deny it, we say, okay, did you, uh, so did you pay off the lender? Because we see a case number right here. So yeah, you're straight up about it.

Do you try to approach them and say like, hey, I might be able to help you stay in the house, or is it mainly like, hey, we stop the foreclosure from happening? How does it work?

We say we don't know. I mean, we're completely honest, but a lot of times that's what they say, right? "I just want to stay in the house." And it's like, okay, well, we need the facts. We need a lot of information to be able to know whether that's possible or not. And that could be possible. But 99 times out of 100, we already know that they can't pay their mortgage, so they probably can't pay their rent and they need money to move out, right? And sometimes they can pay their rent, but that sometimes need a lesser amount, you know, for a monthly rent too. And then the other factor is 99 times out of 100, we wouldn't be comfortable keeping them in the property with the condition that it's in while we own it, right?

So yeah, yeah, if you're gonna buy it, I don't think you suggest that they keep it. Yeah, no, if they want to keep it, then, you know, potentially that you'd have to figure out how you could get them to catch the loan up, but you're not going to buy and let them stay in it because that just doesn't make sense. So let's talk about a scenario So you reach out, you get the county data. I know a lot of the times when I'm reaching out to pre-foreclosure lists, you're catching them right as they go into pre-foreclosure versus like a week before they lose the house. So are you reaching out to somehow reach out to the ones that you know are about to go to foreclosure? Are you just hitting the list and whether or not they're wherever they're at in their journey, you just follow up?

So it's, it's different everywhere. For judicial states, typically a lender has to file a notice of default with the county. And so you're able to easier get pre-foreclosure data. But when on nonjudicial states, you're just seeing that final foreclosure notice with an auction date, and that's when the race starts. But yeah, we're exhausting both areas, both opportunities when there's the opportunity to do that.

Yeah, because when I was at the family, I talked to some guy that they specialize in also targeting foreclosures, and he says that sometimes, like, he'll send mailers to these people on this list for like 18 months because sometimes they'll be able to catch it up, then they'll be— then they'll go back into it. Sometimes it doesn't hit them until later. So when I first started marketing, I would just, you know, I didn't know what I was doing. I would just send out mail or text or whatever, and I would just try and hit people with like one massive blast. But are you saying that sometimes it requires like a consistent drip on these people? Like, you got to be consistent whether or not— instead of just one hit, You got to keep it going consistently.

Yeah, 100%. And so you're right, though. There's those people that come in and out of pre-foreclosure all the time because they're catching up or they do something like sometimes they declare bankruptcy and kick the can down the road. There's different components.

People game the system and a lot of people have been in foreclosure. Yeah. Years and years and years. Yeah.

Yeah, 100%. And I ran the numbers and in our judicial state, you know, we're in a nonjudicial state too, but our judicial state where we get pre-foreclosures, 1 in 4 go to foreclosure, the other 3 don't. So 75% of them don't actually go to foreclosure. Got it. But yeah, all those numbers kind of help set expectations and develop kind of your target and stuff.

So I'm really excited for you in the way you're marketing because when I've been at the family and I've been like networking with a lot of these guys that do a lot of marketing, a lot of the time, like what I'm hearing the most that like always works and like is a great lead source that a lot of people pinpoint is probate and pre-foreclosure. Like, but you master those, right? And like the way that I was taught, it was just like pull a giant list, kind of like you were saying before, and just blast it. And that can get you in a lot of trouble, can get your marketing expenses super high. And, uh, yeah, that's— went back to the model that I'm teaching, like, for, for newer beginners. And but if— as I don't really market right now because I just do the model I teach, but if I am to, you know, again, go to market, it's, it's pretty much just those two. It's pre-foreclosure and probate. That's it. That's all I'm I'm going to mess with and I'm going to master it.

Exactly. And that's what we've actually— we actually kind of have that on our pipeline is we will diversify to probate, but we would love to just be the niche, niche specialist first with pre-foreclosure. And a lot of pre-foreclosures are already involved in probate processes that by nature we have to deal with and we have. But yeah, I totally agree with you. That's the riches are in the niches, right?

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Mm.