jobs and the wife took care of the bills. Though the husband was working hard to make ends meet, the couple had fallen behind in their mortgage payments and were receiving notices from their lender. We set up a meeting at my office to do a conference call with the lender to negotiate a solution.
When the couple arrived at my office, I immediately saw the nature of the problem. The wife was decked out in designer clothes and adorned in jewelry that would have made the queen of England jealous. After looking over their finances, I explained that to avoid foreclosure, the couple would need to slash expenses and sell some of their more valuable assets.
Upon hearing my words, the wife was visibly upset. Angry and near tears, she stood up and asked, “What do you want me to do … take the clothes off my back and the rings off my fingers?”
I said, “You can leave your clothes on, but let’s take a closer look at those rings.” The couple were $10,000 behind on their mortgage payments. I agreed to take the jewelry and give them $10,000 in return so they could sell the house and move on. The next day, I took the jewelry to a friend of mine who owned a jewelry store. He appraised the rings at $5,000. So I took a $5,000 loss, but I scored a great Valentine’s Day gift for my wife!
Dealing with anger and angst
Understandably, when people are in a financial bind, they’re often upset, anxious, and angry. Parents have the daunting task of facing their kids and telling them, “We can no longer afford to live here.” They’re embarrassed about what their neighbors, friends, and family may think. They may be angry at their boss for laying them off or firing them. In many cases, the husband or wife has just found out about the pending foreclosure from their significant other who spent the family into the poorhouse. During the COVID-19 pandemic, many homeowners struggled with the financial fallout from family illness, job loss, business closures, and mandatory shutdowns.
When you show up at the home of a couple or person facing foreclosure, and you tell the homeowners that you want to help them by buying their property, all that fear, frustration, and anger is likely to get unleashed on you. Even if you can manage to avoid direct conflict, you may be recruited into refereeing a domestic dispute or witnessing emotional outpourings that you’re just not used to seeing.
Distressed homeowners are often most upset about something that happened in the past — something they can’t go back in time and fix. One of your first jobs when dealing directly with homeowners is encouraging them to put the past behind them and address the current situation. Shifting focus to the present can reduced the emotional energy significantly.
Assessing your ability to deal with pre-auction scenarios
The most successful pre-auction investors are people who are well versed in local foreclosure laws and procedures and who can quickly and accurately assess the average homeowner’s financial predicament. To determine whether you have the qualities to invest successfully in properties in the pre-auction stage, place a check mark next to any of the following statements that you feel are true:
People generally like me and trust me right off the bat.
I feel comfortable talking with people I’ve never met.
I’m a good listener.
I’m diplomatic, often acting as the mediator when friends, family members, or co-workers have issues with one another.
I never met a problem I couldn’t solve.
I’m good with math, especially dollars and cents.
I can tell people the truth even when they don’t really want to hear it.
I can handle disappointment. Even if I’ve invested a great deal of time and effort in helping a homeowner, I won’t get terribly upset if I don’t get the house.
I can let people fail even after I offer them outstanding advice on how to avoid a catastrophe.
Having every single one of these qualities isn’t essential for success in investing in pre-auction properties, but if you checked only two or three items, you may want to consider stepping into the foreclosure process at the auction or post-auction stage. The more of these qualities you have, the more successful you’re likely to be in dealing directly with homeowners.
Pursuing Foreclosure Notices
Whether you buy properties directly from homeowners before auction or wait until the auction, the weekly foreclosure notices in your area are required reading. In almost all areas of the country, the lender must post a weekly foreclosure notice or Notice of Default (NOD) in a publicly accessible publication several weeks before the auction. In my area, the foreclosure notice must be posted for four consecutive weeks before the sale in any public newspaper that serves the area. The appendix at the back of this book explains each state’s requirements for posting foreclosure notices.
The posting of the foreclosure notice is almost an entirely separate stage of the foreclosure process — after negotiations between the homeowners and lender break down, but before the property is sold at auction. At this stage, every foreclosure investor in your area probably knows about the property, and any investors who are interested in buying the property before auction are likely in the process of trying to contact the homeowners.
The investor who arrives first and whom the homeowners trust most is typically the investor who stands to get the property.
Knowing the benefits of waiting for the foreclosure notice
Many foreclosure investors don’t like dealing with distressed homeowners until the official foreclosure notice is posted because until that point, homeowners
