Pre-foreclosure leads for real estate investors

What is a pre-foreclosure lead?

Pre-foreclosure is the period after a lender has formally started the foreclosure process and before the house is sold at a foreclosure sale. A pre-foreclosure lead is a property in that period, found from the public filing that starts it.

It is a circumstance, not a motivated seller. Most owners work to keep the house: they catch up on payments, get a loan modification, refinance, or sell with an agent for full value. For a few, selling as-is before the sale date is genuinely their best option, and that’s where an honest cash offer can help.

Is an owner in pre-foreclosure a motivated seller?

Not by that alone. A motivated seller is anyone willing to accept an offer below market value regardless of the reasons why (what a motivated seller really is). Think it through:

Foreclosure is a circumstance. Motivation is a response to a circumstance, not the circumstance itself. The formula isn’t “Foreclosure = Motivated = Deal”. It’s Foreclosure + Motivated = Potential deal, and both conditions need to be met, not just one.

So what is this list, really? It’s a list of people who can potentially become motivated. Most never will. Some will, and the day they are, they go to Google. That’s the reason to work the list: get in front of these owners before anyone else does, and before they hit Google, so that when they’re ready, they already know who you are. Keep the message simple: who you are, how your offers work, and “visit my website”.

That’s what Deal Radar is for. It doesn’t call a circumstance motivation. It scores each property on the probability that its owner is willing to sell below market value: the higher the score, the higher the probability. A probability, not a promise. Start with the highest scores. Those are the owners to reach first.

Where the records come from

How foreclosure starts depends on your state:

Timelines vary a lot by state and by case, from a few months to much longer. Search “[your state] foreclosure process” on your state’s court or housing agency website, or ask a local real estate attorney, so you know how much time owners in your area usually have.

Qualify a pre-foreclosure lead, step by step

1. Check the filing is current.
   Look up the case or notice. Has it been dismissed, cancelled or rescheduled? A resolved filing is not a lead.
2. Estimate the equity.
   Value (from recent sales) minus what’s owed on the mortgage and any other liens. The amount in default is not the loan balance; you need the balance.
3. Estimate repairs and a rough deal.
   Is there room for a price that works for you and still leaves the owner something? How: ARV and repairs.
4. Note the timeline.
   How far away is the sale date? Too close, and there may not be time to close.
5. Look for other signals.
   Vacant, absentee, tax delinquent, long ownership. More signals usually means a stronger reason to sell.
6. Decide: pursue, watch or drop.
   Pursue if there’s equity and time. Watch if you’re unsure. Drop if underwater or the sale is days away.

Check your state’s foreclosure-rescue rules

Some states have laws that protect homeowners in foreclosure from buyers who take advantage of them. These laws can require specific contract language, give the owner a right to cancel, restrict certain deal structures, or require licensing. Rules differ by state.

Before you contract any house in foreclosure, have a local real estate attorney confirm what your state requires. It protects the owner, and it protects you: a contract that breaks these rules may be unenforceable.

Approach owners with respect

These owners are under real pressure, and many are contacted by a lot of investors. Stand out by being useful and honest:

1. Point them to your website, not a sales pitch.
   “If selling as-is would ever help, here’s who we are and how our offers work: [your website].” Let the ones who are willing choose you.
2. Explain their alternatives honestly.
   Catching up, a loan modification, listing with an agent, or selling to you. Suggest free HUD-approved housing counseling if they haven’t talked to anyone.
3. Show your numbers.
   Value, repairs and your offer, line by line, so they can see how you got there.
4. Never pressure, never promise to “save the house”.
   If the best option for them isn’t selling to you, say so.
5. Follow the calling and texting rules.
   See skip tracing and outreach rules.

How to find pre-foreclosure leads

1. Search the county records for new notices or cases,
   weekly, in your farm area. Many counties have online search; some publish legal notices in local newspapers.
2. Rank them, and reach the most likely first.
   Start with the owners most likely to be willing to sell below market value, before they hit Google. See how to find motivated sellers.
3. Qualify, then find the owner.
   Only trace owners of properties with equity and time.

Next: tax-delinquent properties. Or back to the wholesaling roadmap.

Questions