How to Work in Foreclosures and Short Sales
Find out what it takes to succeed when working with distressed sellers in a foreclosure or short sale situation.
I picked up on the trend in mortgage foreclosures about five years ago, when zero-interest loans and other enticements were pulling previously unqualified individuals and families into homeownership.
I specialize in two areas: foreclosures (the legal process by which a mortgagor of real property loses his or her interest in that property for failing to comply with the terms and conditions of the mortgage) and short sales (a situation in which a lender accepts less than a full payoff for a property that’s in foreclosure).
I find distressed sellers by buying lists from companies like Foreclosures.com and ForeclosuresDaily.com, both of which offer these public records for sale. I can then match them with a database of potential buyers that I’ve developed over the years through networking with other sales associates, sign calls and working in this particular sector of the market.
Eventually, most homeowners facing foreclosure resign themselves to the fact that they’re going to have to sell their home, and at that point I list their property for sale. We discuss options, such as a short sale, or lenders willing to take less than the balance owed on their homes. I explain that even the most complicated problems can be solved through solid negotiations and perseverance, and that I’ve even been able to get the IRS to release property liens.
Two-thirds of my business this year will come from working with home sellers whose properties are in foreclosure and with investors and other buyers of such properties. The top producer who’s closing 100 or 200 transactions a year, for example, or the one who doesn’t like cold calling, prospecting or spending too much money on marketing can easily pick up 40 to 50 percent more business by learning the ins and outs of short sales.
Here’s how to get your slice of the distressed markets: 1. Listen Up
Many times, sellers don’t even know they’re in a short sale situation. Other times, they just don’t know what to do. One way to fail quickly is by turning on your hard-sell tactics and dictating to your customers, particularly if you’re working with sellers.
Understand that most of these people are in financial distress and possibly dealing with a life-changing event such as a death in the family, a divorce or a job loss. They probably want to keep their home, but have no idea how. They are being barraged by phone calls and letters, and are wondering where they will be living a month from now. To handle these tough situations, I first listen to the issues and let the home-owners vent. I never pass judgment. And I don’t talk about my services or myself at all; instead I just pay attention and ask follow-up questions when appropriate.
Once I know their story I offer solutions (such as a short sale worked out with the lender) to the problems, and let them decide how to proceed. 2. Become Educated
What the average real estate professional lacks in this market sector is knowledge about how foreclosures work and their role in helping owners or buyers get the best possible bang for their buck (given their financial or life situation).
A real estate foreclosure trainer who was also an investor taught me how to buy properties that are in foreclosure and how to negotiate debt on various loan products. I learned about it from the investor perspective and then applied that knowledge as a real estate professional. If you’re looking to bone up on this area of the market, you should attend classes, find mentors and read up on the process online and in trade journals.
Short sales, for example, require a high level of knowledge about the inner workings of these deals. The more you know, the easier it will be to see these transactions through.
Learn about the different parameters that each loan must meet in order to qualify for this type of sale. An FHA loan, for example, may have different guidelines concerning the seller’s financials than a VA or a Freddie Mac loan. Be aware of this so you’ll know how to put together packages that meet those criteria. 3. Become the Buyers’ Expert
One way to court buyers is through real estate investment groups, which comprise investors who are always on the lookout for foreclosures and short sales. And don’t forget to advertise your expertise on your Web site (e.g., by creating a section specifically targeting buyer-investors seeking foreclosure properties).
Going to foreclosure auctions to find prospective buyers is another excellent approach. Finally, word of mouth works well, particularly when it comes to referrals from other real estate professionals who may not specialize in this market, but who come to trust you as a good source of information for their buyers and sellers who are in need.
Through these sources, and through networking, sign calls and the local MLS (for marketing to other real estate professionals), you’ll be able to develop an extensive database of potential buyers of distressed properties. 4. Spread the Word to Sellers
The best way to reach sellers of foreclosure properties is by buying lists from Web sites like Foreclosures.com and ForeclosuresDaily.com or checking the Internal Revenue Service’s property site (www.treas.gov/auctions/irs/index.html). Through these online resources you can determine which properties in your area are coming up for foreclosure and then approach potential sellers with your services.
Form bonds with mortgage brokers, bankers, lawyers and other real estate professionals, all of whom will refer business your way if they know that you can help their customers navigate the foreclosure waters. And once you’ve helped someone out of that situation, expect to see a constant referral source of business both from the seller (who will eventually buy another home and look to you for help with that acquisition) and from his or her family and friends.
When I started in this area of the market five years ago, I was skeptical when I was told that people would be grateful that I came knocking on their doors, ready to help. They’re losing their homes; how could they possibly be grateful? But, I’ve since learned that a real estate professional’s services are sorely needed in this arena, where an increasing number of homeowners are grappling with foreclosure.
It all pays off when sellers tell me that they’ve had their best night’s sleep in months and that I’m the
answer to their prayers. Jeanny Campbell is a sales associate with RE/MAX Realty Plus in Sebring. In the industry since 1980, she expects to close 75 transactions this year, at least 50 of which will be foreclosures or short sales. Campbell is also affiliated with No For Group Inc., a firm that negotiates debt and coaches sales associates, brokers and buyers/investors on how to work in those markets.