Negotiating Single Family Residence Foreclosures

by Barney Zick


Think of yourself as an investor or buyers broker. Your goal is to buy one or more single family detached houses at the best price possible, so you target foreclosures.

First comes the sorting process. You are looking for value so . . .

One sort option would be look for properties with old loans. Every community has had its own price patterns. Go back to the time before a 25% run up in prices. Maybe that is 2, 3 or 5 years ago. If the loan is later than the benchmark years, drop it off the list.

Maybe you'll have a property style sort: only brick on slab, no houses on pier footing--or whatever makes sense and non-sense--is your market.

Maybe you'll have a type sort, like no condo, or a function sort like 3 bedrooms or larger.

Now is the time to contact the owner in foreclosure. Maybe you've sent a postcard and they have called you. Better yet, maybe it's both in foreclosure and listed. But now you are face to face.

The first half of your meeting will be questions. You'll need lots of facts or, better yet, verify the facts you have in front of you. Be kind but be persistent. If they say, "You sure ask a lot of questions," reply, "If you were about to buy a house, you'd ask a lot of questions too, wouldn't you?"

In general, all folks in foreclosure are in denial. Someone will be along soon to bail them out, so be prepared for all sorts of "dancing". Your job is, in part, to lead them into reality.

That is done in several levels. They need to get a realistic exposure to their option; they need to know what will happen if they do nothing; they need to know the odds; and they need to be given an offer.

In sales and negotiating, education aids the process. That said, beware of "the little professor syndrome". Sometimes, in your 3rd or 4th year in the business, you'll know enough to give a seminar. Now is not the time. Tell them enough to motivate them, and enough to help them make a decision. Keep it simple and understandable, and do no more than necessary.

The key message to deliver is simple: Time is their enemy--if they don't take action, the cost is very high. In that event, they will not only lose their equity, they will lose their credit.

Even worse is the loss of credit. Many think credit blemishes only the last 7 years. Not so--if you ever apply for a home loan, they will ask, "Have you ever had a foreclosure filed against you?" That question can be asked forever.

Now you lower the boom. Tell them the truth--they are about to lose both their equity and their credit. You can't do anything about the lost equity, but your offer will save their credit. This is a setup for a loan takeover, with no compensation besides making up back payments.

Be prepared--this will not soak in immediately. You'll have to say it more than once, and in more than one way.

Remember that this is a negotiation. Do your research first, then ask questions before you make an offer. If there is room to give at all, don't give any concessions unless they give you something in return.

Next week we will discuss more in depth how to make a fortune with foreclosures and flippers.


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The above article is the copyright of Robert G. Allen
Author of Multiple Streams of Income
http://www.robertgallen.com

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