At the risk of sounding self-serving, we here at RealtyTrac earnestly contend that 2014 will represent one of the best years in recent memory for a low-risk, high-reward foreclosure purchase.
Sure, foreclosure activity is down to its lowest level in seven years, but it’s when foreclosures are rare that they represent the least risk because they aren’t threatening to crater the housing market again anytime soon. Meanwhile home prices in nearly every market nationwide have clearly hit bottom and are now rising consistently, which translates into a bigger potential upside for a foreclosure purchased at a discount.
With that in mind here are the top 10 secrets to successfully buying a foreclosure that we’ve discovered over the last 18 years of business working with millions of satisfied subscribers.
1. Recognize that foreclosure is a process, not an event
Many people think of foreclosure as the event where a homeowner loses his or her home. It is in fact a process that can extend over many months, and in some cases even years. This is a simple recognition but it’s fundamental to creating a successful strategy for buying foreclosures in any market.
While there are myriad methods used to successfully purchase a foreclosure, all of them boil down to one of three basic strategies:
-buy directly from the homeowner during pre-foreclosure
-buy at the public foreclosure auction
-buy from the bank post-foreclosure (Bank Owned on RealtyTrac).
3. Look for both listed and unlisted foreclosures
Yes, it takes more work to pursue unlisted properties, but it can pay off by giving you a massive jump on other buyers and investors — particularly in a market with a shallow supply of homes for sale. Of course, listed foreclosures also represent good opportunities and come with the added benefit of a more direct path to purchase. You can filter by listing status when you search foreclosures on RealtyTrac.
4. Find an agent not afraid to use the f-word
Not all agents are qualified — or interested for that matter — to help you successfully pursue and purchase a foreclosure bargain. Find one who doesn’t cringe when you bring up foreclosures. We’ve identified plenty of such agents across the country with our RealtyTrac Agent Network.
5. Understand your financing options
Some folks assume that buying a foreclosure means paying with cash. While that’s true in most states if you purchase at the public foreclosure auction on the courthouse steps, you can finance your purchase of foreclosure when you buy during pre-foreclosure or from the bank.
6. Soften your target market with mailings
Particularly if you’re pursuing unlisted foreclosures, it’s best to start with a softer sell. Send out discreet — that means don’t even mention the word foreclosure directly — postcards or letters with handwritten notes to homeowners in trouble in your target neighborhood. On RealtyTrac you can easily download property information and mailing addresses — even for offsite owners — into an Excel spreadsheet for filtering and mail merge capability. More about mailing lists.
7. Don’t be afraid to knock on some doors
This isn’t for everyone, but once you’ve softened a market with mailings you can follow up with some door-knocking, or have your agent do it for you. Again, be discreet and avoid mentioning the word foreclosure unless they bring it up. A non-threatening opening might be something like this:
“Hi, my name is Bob and I’m looking to buy a home. I really like this neighborhood and I was wondering if you know anyone who might be interested in selling.”
Even if the initial response is no, you can leave your contact information, ideally on something they aren’t likely to throw away immediately.
8. Attend at least one foreclosure auction
While foreclosure auctions are most definitely not for everyone — you do need cash in most states to purchase here — we highly recommend attending at least one auction. It’s fascinating to watch other buyers in action, and you may be able to connect with local investors who will call you first before they list their next flip.
9. Be bold with banks
It’s probably self-evident you’ll need to deal with banks when purchasing a bank-owned property, particularly an unlisted one. But in some cases, namely short sales, you’ll also need to interact with the bank when purchasing a pre-foreclosure. A good agent can help with this, but the bottom line is you’ll need to be bold and persistent to get through to the right person who can talk to you about the property, and then you’ll need to be bold and persistent again in convincing that person you are a serious buyer they should respond to.
10. Take the first step
Buying a foreclosure can seem intimidating from the outside looking in, but much like many other opportunities in life that seem overwhelming at first, the intimidation factor quickly shrinks when you simply take the first step.
And then the next.