With experience comes knowledge. And Louis Butler certainly has the experience to give him ample knowledge about how to find foreclosure bargains. After purchasing more than 25 foreclosure properties in the Little Rock, Ark., area, Butler can spot a deal from more than a thousand miles away — literally.
“I don’t need a spreadsheet or software to spot a deal,” said the San Dimas, Calif., native who buys foreclosures in a town that is nearly 1,600 miles from where he lives and works. “I have a local real estate agent in Little Rock, and local title and loan people that help put together my foreclosure deals.”
Butler originally lived in the Little Rock area, so he knows the good locations and neighborhoods. He said he looks for properties with 30 to 40 percent equity. Then, he puts together wholesale deals that are 20 to 30 percent below market value in certain areas and zip codes that he is familiar with.
“I pencil it out, look at the comps, search for liens and rely on my local realtor to send me photographs,” he explained. “Then, I contact the owner and negotiate a price. A lot of my deals I don’t even inspect the property. I look at photographs sent to me from my realtor and study the comps.”
To accommodate his long-distance investing, Butler sometimes receives closing documents via overnight couriers and has to sign the documents and ship them back immediately. The mailing costs are a small price to pay for the benefits of investing in a market that produces so many good deals for him.
Targeting a less-expensive housing market across the country has helped Butler locate a plethora of bargain buys, but that’s not the only way to find great deals on foreclosures. There are as many strategies for finding great deals as there are foreclosure investors. Below are a few key strategy secrets from experienced investors across the country.
Handwritten letters stand out
While many investors use printed form letters to contact homeowners in default, investor Michelle Mangione relies on handwritten envelopes to drive her foreclosure business. Mangione’s letter-writing strategy got her the dream home she currently lives in four years ago when she first started investing in foreclosures. She purchased her Fallbrook, Calif., home in 2003 for $655,000. In March and April 2007, two homes down the street sold for more than $1.5 million.
“I target pre-foreclosures and send out handwritten envelopes with a form letter inside,” said Mangione, a licensed realtor who invests in foreclosures full-time. Mangione mails 500 to 1,000 letters at a time to homeowners in the early stages of default. Typically, she gets a response rate of about 1 to 3 percent per mailing. Many conversations with distressed homeowners go nowhere, she said. “When I get a telephone call back, then I check out the property and start the dialogue with the owner.”
Auction deals can amaze
Like Mangione, Michigan real estate investor Nancy Levin also purchased her dream home in foreclosure. Levin found a foreclosed home in an affluent Detroit community.
“The property was in pre-foreclosure when I first saw it online,” explained Levin. “I kept tracking it on the Internet. My agent didn’t even know the property was in foreclosure. Finally, it went to auction — and to my surprise — I was the only one who showed up at the auction. I paid cash at the auction and bought the house for $260,000.”
Levin said the 2,800 square foot Bloomfield Hills home, which appraised for $430,000, was totally remodeled and featured three baths and three bedrooms. She bought the redemption rights from the previous owner for another $20,000 and moved in.
“I got this place for a steal,” Levin said. “Right now, Michigan is foreclosure heaven. It’s raining foreclosures here. I’m looking to do another one soon. If I can find a deal like the one I’m living in, I’ll definitely buy it.”
Strike while the iron is hot
Glen Miller, a 39-year veteran of foreclosure investing, believes now is a great time to buy foreclosures.
“After I look at the properties on RealtyTrac, I then go the courthouse and look for properties that have low mortgage balances and I look for any outstanding liens,” said Miller, who currently owns 20 foreclosure properties in and around Vero Beach, Fla. Miller owns eight duplexes, four single family homes, a condo unit and has just flipped five foreclosures. Now, Miller is finishing rehabbing another foreclosure that he will sell soon.
“I’m putting on a new roof on this four-bedroom, two-bath home in Fort Pierce I bought for $60,000,” Miller said. “I’ll invest another $20,000 and put it on the market in the next three weeks and list it for $130,000. I should sell this one fast because the other homes on the market are listed for $160,000 and more.”
While there’s no one secret to buying foreclosure property at discounted prices, Miller and the other investors agree that it’s important that investors jump in and find out what works for their personality and target market. Once they find a strategy that works, investors should stick with it.
“You got to have common horse sense. This isn’t rocket science,” Miller said. “You just have get off your behind and go out and attack the market.”