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of dealing with other people’s financial messes

       Misleading information or outright lies from homeowners who are desperate or still in denial

       Indecisiveness of homeowners who change their minds at the last minute because they really don’t know what they want

       Legal issues concerning just how far you can go to persuade homeowners to sell their property at less than market value without committing fraud

      Carefully consider the pros and cons before investing in anything, and honestly assess your ability to deal with the negative aspects of certain investment options. Buying foreclosure properties in the pre-auction stage isn’t for everyone.

      Guiding homeowners to good decisions

      When helping homeowners, you can’t try to pass yourself off as an attorney, accountant, financial adviser, or therapist unless you really are one. But you’re often called on to play some of these roles. Like a therapist, you have to be able to listen to the homeowners. Like an accountant, you need to be able to look at the homeowners’ finances to assess their options. And, like an attorney, you need to know the foreclosure and redemption laws in your area.

      

Make it very clear to the homeowners that you’re not an attorney, real estate agent, or accountant unless you are one. State up front that you’re an investor representing yourself. Full disclosure is the best policy. Passing yourself off as something you’re not is fraud.

      A TYPICAL DAY IN THE FORECLOSURE OFFICE

      As a real estate broker, I once met with a couple facing foreclosure. The husband worked two 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!

You can’t offer legal advice if you’re not a licensed lawyer, but you can inform homeowners of their options and recommend professionals who can help. If the homeowners can refinance their way out of a foreclosure, you may be able to steer them to a loan officer or financial adviser who can provide additional assistance. In Chapter 4, I explain how to assemble a team of experts who can help you buy and sell foreclosure properties so that you’ll have plenty of experts on hand to recommend to the homeowners.

      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.

      

You can often relieve some of the pain of foreclosure by letting the homeowners know that they’re not alone. Know the foreclosure statistics for your area, share this information with them, and let them know about their options. This information can often defuse a tense situation and remove some of the anger that may be causing a rift in a couple’s relationship. Ask at your county’s Register of Deeds office; sometimes, the office tracks foreclosure numbers for the county and may be able to provide city, county, and state statistics.

      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

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