Back in December 2005, my life changed forever because I closed my first deal in wholesaling pre-foreclosures.
In one perspective, I want to think it happened all by mistake and I just got lucky.
But in many ways, I did a few things right and I want to share them with you in this video.
The only mistake was that I made $10,000 when it could have been easily $15,000 if I had a tad bit more negotiation skills.
But I’m sure you would agree that $10,000 is okay considering that it was my first deal ever.
And it was also the first time I would have such an amount of check deposited into my personal account.
In this lesson, I will be updating you on the simple 5 stages process to wholesaling pre-foreclosures and the common holes of mistakes you should avoid.
Here is a quick refresher on what wholesaling pre-foreclosures is all about.
First of all, what are foreclosures because that’s the only way to have a clear understanding of what pre-foreclosures are.
At least in the United States of America, most people buy their first real estate property using a mortgage loan.
A mortgage is created when a real estate property becomes a collateral to be taken if the property owner stops payment on a loan as agreed upon with the lender.
The taking away of the property is a legal proceeding called foreclosure; it takes time.
And how long it takes depends on the state and the local jurisdiction where the property is located.
How Long Does the Foreclosure Process Take?
So the process that starts when the lender files paperwork with the courts indicating intentions of foreclosure on the property is called pre-foreclosure.
The duration of pre-foreclosure varies from state to state.
In some states, the property would be foreclosed on in 90 days…
While some other states would take up to 11 months after mortgage payment has stopped before the actual foreclosure.
Wholesaling Pre-Foreclosures Explained & Details of My First Deal in 5 Stages
Wholesaling real estate is the art and science of finding deeply discounted properties, locking them under purchase contract…
…and assigning the equitable rights to an end cash buyer investor in exchange for an assignment fee.
My first deal was with a guy who owned a property in Newark, New Jersey.
He had stopped sending the lender his monthly mortgage payments.
And after 3 months of back to back default, the lender filed a lis pendis.
Lis pendis is another way of saying pending law-suit.
Wholesaling Pre-Foreclosures Stage 1 – Data
At that point, his information and his hardship became public record which means, pre-foreclosure investors and wholesaling professionals like me were able to contact him with an offer to purchase his property.
Back in the days, you would have to drive to the county courthouse buildings to pull this data and manually sort them.
But even as far back as 2005, there were websites that aggregated this data in a web portal where we can pull it affordably.
These days, I use a very cool software service to access data of over 150 million United States properties and tens of thousands of pre-foreclosure data.
You can try it for free at:
Stage 2 – Contact
I sent him a letter offering to buy his property and he called me back.
Direct mailing letters was popular and quite effective in those days and that was how we initiated contact with these distressed owners.
These days, we have so many other options to initiate contact with a distressed seller or better yet, attract them to initiate contact with you.
Just in case you have been sold by gurus on a strategy called driving for dollars, please note that it is not a contact or marketing strategy of any type.
Why Driving for Dollars & Cold Calling are the Most Expensive Way to Attempt Wholesaling Pre-Foreclosures
Driving for dollars is precisely a data collection strategy and the most expensive strategy at that because of the fact that it involves your personal time.
I am hoping that you realize that time is worth more than money because you cannot replenish time.
So I don’t recommend driving for dollars.
Inside the 11 days challenge which you can find at www.11DaysChallenge.com, I reveal 4 more contact initiation and lead generation strategies.
Cold calling is also dead unless you are ready to spend time and money on micromanaging foreigners who can’t comprehend American or modern day English.
Most of us in this modern and digital era also do not appreciate strangers initiating unsolicited calls to our phone or leaving pitch call messages in our voicemail.
Unsolicited Cold Calling is a turn off because we have the option to search Google for services of any type when we need it.
That’s why 11 Days Challenge also has the option that covers digital and attraction marketing strategies that gets distressed sellers initiating contact with you.
You would agree that it’s a better position to be in when they are the one reaching out as opposed to the other way around.
Wholesaling Pre-Foreclosures Stage 3 – Leads
Once that gentleman called me back from the letter that I sent him expressing his interest in selling his property, a lead was generated.
A common myth in the real estate amateur world is that everything before this point was also a lead.
People would drop a $30 gas in the car, drive around town and write down 30 property addresses talking about they have 30 leads.
Nah bruh… You do not have 30 leads. You’ve got 30 pieces of data.
And not only did it cost you $30, it also cost all that time in the snow or the sun…
While the smarter ones are spending their time with their family or teaching you marketing strategies they do not practice.
That sucks right?
Without an actual interest from a property owner to sell, what you’ve got is data;
no more and no less.
That’s also true with phone numbers and contact information from skip trace data.
Wholesaling Pre-Foreclosures Stage 4 – Contract
Negotiations started and whatever I negotiated meant that I was about to make $20,000 from that one deal.
In fact at the time, I used a one-sided option contract which simply stated that I had 4 weeks to buy the property at $195,000 signed unilateral by him.
I was not obligated in any way to buy the property.
The property was worth $300,000 after repair and it needed just cosmetic repairs with estimates at less than $5,000.
So how did I come up with $195,000?
I’ve created a free tool for you to find after repair value (ARV), estimate cost of repair (ECR) and how to calculate the maximum allowable offer (MAO).
You can find it at www.DealEstimator.com
Shortsales & Wholesaling Pre-foreclosures
With this deal, he owed way less than $195,000 and I want to tell you why that is significant.
There were many cases after that where the property owners owed more than what I was willing to offer or even more than what the property was actually worth.
In such cases, I would have to offer their lender less money than they owed and that’s what they refer to as a shortsale offer.
I made a lot of money from negotiating shortsales to help many property owners escape the trap of a crashed market.
The Negotiations Script for Wholesaling Pre-Foreclosures
As you’ve probably noticed thus far in the first 4 stages of wholesaling pre-foreclosures, the state to state foreclosure process duration is irrelevant.
All that matters regardless of what state the property is located is to make sure that the seller-lead is motivated to sell quickly.
Make sure they really can’t afford to hold on to the property before you engage them in any form of conversations or negotiations.
How do you make sure you engage only motivated seller leads?
HAVE YOU SEEN THIS: More Video on our YouTube Channel
It’s actually as simple as asking them open ended questions and letting them do most of the talking as you take notes.
You want to be asking simple questions such as…
“What’s the story of property? Tell me!”
“How can I help?”
But if you are cold calling from finding them on Zillow, you will need an extra-awkward skill set to get to that part of the conversation.
And for as long as a prospect feels like they are the one helping you, they can’t feel like they are getting value from interacting with you.
You will not be able to secure a contract and that also means you can’t close deals.
There are no extra magical words to say because they are in pre-foreclosure.
In fact, you should never be the one to bring that hardship situation up directly even though it’s public records.
That’s creepy behavior and it robs most people off the wrong way.
You can however, during consulting, ask if they are current on all payments.
Did you note that?
It’s a consultation and you should never be in a position of begging anyone to sign a contract with you.
Even if you manage to get them to do it, it will always backfire.
Stage 5 – Deal
Within 48 hours of locking in that contract at $195,000, I found an end buyer investor who wanted the deal at $215,000.
This stage is called deal disposition.
Our closing day was a few days before Christmas of 2005.
The closing department from the title company gave my seller the preliminary hud-1 closing statement for review at the closing.
Once he noted that I was about to make $20,000, he threatened to pull the plug.
It was my first deal and yes… that’s an excuse to why I offered to split my money 50/50 with him as opposed to offering him a couple more thousand dollars.
Terrible negotiation skills… I know.
So I ended up with $10,000 on my first deal wholesaling a house in pre-foreclosure.
To learn more, go ahead and download my 2 books
SMART REAL ESTATE WHOLESALING and
REAL ESTATE MONEY SECRETS
for free at:
FORECLOSED VS LIS-PENDIS📍 Wholesaling Pre-Foreclosures
QUESTION “Weird situation for me.
I just had someone send me an address to their aunts house she no longer owns. He said the state owns it, so I’m guessing that means it was foreclosed?
If that is the case, can I still put it under contract and how would I do that?
Hopefully you can help me, I’m obviously a beginner.”
Frequently Asked Question [FAQ]
Can you negotiate a pre-foreclosure?
Yes you can negotiate a pre-foreclosure because the owner is still in control of the property during the pre-foreclosure stage.
How do you get into pre-foreclosure?
To get into pre-foreclosure investing, you need to learn marketing skills because the home owner is still in charge of the property. Marketing skills will help you setup outreach campaigns to a pre-foreclosure list that you can pull publicly.
What does pre-foreclosure mean?
Pre-Foreclosure is the stage that a property goes through for a few months to allow the home owner to catch up with and make arrangement for payments before the a lender finally completes foreclosure on it.
How can I get pre-foreclosure with no money down?
You can replace the need for money down deposit with marketing skill. Simply find deals for investors by marketing to a list of property owners in pre-foreclosure. The list is public.