Read an Excerpt
How to Find Foreclosure Property Early
Excerpted from How to Make Money on Foreclosures by Denise L. Evans ©2005
Unless some lender violates its customer's privacy, you generally won't be able to find troubled properties before they become public knowledge. The trick, then, is for those borrowers to find you. You want to generate prospects by making yourself easy to find.
There are three efficient and economical ways for people to find you:
1. word-of-mouth referrers (your fan club);
2. seminars and newsletters; and,
3. targeted advertising-small yard signs, etc.
Get to Those Who Need You
Word of mouth might not bring you the most inquiries, but it will bring you the most business. That's because word of mouth generally carries with it an implied recommendation, so the borrower is already predisposed to believe you can help him or her. Unfortunately, if you're just starting out in buying foreclosures, you don't yet enjoy any word-of-mouth reputation.
Seminars and newsletters let you promote yourself without sounding really obvious about it. The recipients of your efforts pay attention because they have a problem, or know someone who has a problem. As a result, they're predisposed to seek help, but you still have to convince them you're the person who can deliver.
If you're a people-person and can comfortably speak in front of groups, then a seminar is the best vehicle for you. If you enjoy meeting with people, but don't like public speaking, then you can create a meet the expert seminar-type function. Someone else introduces you and then people mill about, eat cookies, and drink punch while you wander around and just talk. If you're not comfortable with either one of these, then go with the newsletter or informative article route.
Some people will learn enough from you to avoid foreclosure. That's okay-it's a positive result for you. Every seminar attendee or newsletter subscriber who's able to learn from you and solve their own problems is a powerful and motivated referrer totally convinced of your credibility and value.
Sadly, most people, for emotional or other reasons, will not be able to implement the advice you give them. Those people will become your pre-foreclosure customers.
The most calls, the fewest prospects, and the biggest expense, will come from advertising. That's because most of your advertising-related calls will be from people who are merely curious, or who are only days away from losing their property. Also, you must work really hard to differentiate yourself from all the other pre-foreclosure advertisers, some of whom operate on a nationwide level.
Enlist the Lender
The first person to learn that a loan is headed towards foreclosure is the lender. You'd think the borrower would know first, when he or she fails to make the monthly payments, but borrowers are generally very optimistic people. They expect a miracle to happen, and everything will then be rosy. The lender knows better. But bankers have very strict privacy laws, and can't go around discussing past-due accounts.
This is not to say that you shouldn't talk to lenders. It just means that you must rely on two separate sales jobs. You must sell the lender on the idea that you can help. Then, you must rely on the lender to sell the borrower on the idea that you can help. You want the lender to encourage the borrower to contact you. Why would they do this? Because banks do not want real estate. They call it the owned real estate, or sometimes ORE, or even sometimes REO (real estate-owned) portfolio. It is a lot of work for the bank to own, insure, maintain, and generally fool with real estate they never intended to own in the first place.
Armed with the lender's natural reluctance to foreclose, and then fortified with your personal professionalism, credibility, and sincerity, you are going to sell the lender on giving a single piece of paper to the borrower. That's all-just one sheet of paper.
Before preparing your own flyer, however, you need to set up some relationships with lenders that will foster their giving your flyer to their troubled customers. You need to sell yourself to them. In the beginning, this is a numbers game, like most sales. You must get your product (meaning YOU) in front of as many people as possible. Some of them will buy. Most of them won't. The more people you contact, the more sales you'll have.
This is my personal, always successful, approach to sales:
• make contact
• establish credibility;
• create a relationship;
• ask for permission to sell; then,
Here's the blueprint for getting to talk to the lender.
The first thing you want to do is build a database of lenders. Call all the banks and credit unions in town and find out who's in charge of their real estate loans for your area of interest. (Commercial lenders are separate people from residential lenders.) Many times they specialize by size, usually called small, mid-range, and large. It will change from bank to bank, so you just have to ask lots of questions. The vice presidents who handle subdivision development loans are different from the ones who make loans to homeowners, even though both involve single-family homes. In larger banks, there's usually also a completely separate department for community redevelopment loans, also called affordable housing loans. Many, but not all banks have something called a Special Assets Department. Special Assets handles loans in default.
Put all of these names, titles, and lenders in some sort of database on your computer so you can easily merge them into a letter. Make a note of any names that might be male or female, like Terry Collins, Dale Robinson, or M. D. Smith. Ask the receptionist the gender of these people, so you can make a note. (Nothing will mark you faster as an amateur than addressing a letter to Mr. Terry Collins, who happens to be a woman.)
You might not use many of the concepts in your personal investing, but believe me, someone's going to ask you questions about them. You'd be stunned how many people, upon finding out I'm a commercial real estate broker, ask me about current FHA home loan interest rates. "How should I know," I want to say, "I don't sell houses." But, I don't say that. I just keep up with FHA interest rates, so I don't lose credibility when people ask me those questions.
Being familiar with matters that relate to your industry, if not directly to you, is a simple way to establish credibility with someone. The more credibility you have in general, the more you establish with a lender you want to help you. Some other ways this credibility is established includes the following.
Promote yourself as an expert
Go to your church, civic group, YMCA, or Chamber of Commerce and offer to give a speech or write an article about "Helping Loved Ones Who Might Be Facing Foreclosure." The title shouldn't be "Avoiding Foreclosure," because that's a little too blatant for most people. (Would you want a coworker accidentally observing you reading an article entitled "How to Avoid Foreclosure?") Make the title of your talk positive and proactive. Remember, this is about helping people who may be in a crisis.
Build experience as a speaker or writer
You can do this pretty quickly-it doesn't take very many speeches or articles. I think three would do the trick. Book clubs or retirement community newsletters might be good places to start.
Create a professional appearance for your communications
Create some letterhead on your computer. If you don't have a business address where you can receive personal mail, then it's best to get a P.O. Box rather than use a home address. I think I'm like most people, and if I see a business with an address of "11861 Heatherwood Lane," then I assume that person is not quite legitimate. (I'm usually wrong, but it's a common prejudice.)
Use a dedicated business telephone or your cell phone number. You don't want children answering the phone when people call you. Be honest and ask your boss if you can use your direct telephone line at work for these types of calls. Even if it's not allowed, he or she will remember you had the integrity to ask, and might refer business to you. If you use your cell phone, avoid cute greetings for your voicemail.
Be sure to include an email address (that you check regularly), but not one like email@example.com or firstname.lastname@example.org. Remember, credibility is key. Most Internet services allow you to create multiple user names.
You start to create a relationship with the lender from the first contact. How the relationship develops often depends on the credibility you have established for yourself as a workout specialist and on the repeated contacts you make with the lender. Begin by writing.
Create a Relationship
What follows is a sample of a form letter that you can create to send to lenders and other referrers. Tailor it to your particular situation and your writing style. The things in italics are notes to yourself-things to think about. (Don't include them in your letter.)
This letter does not sell your foreclosure services, so don't modify it and try to accomplish that goal. This letter is simply to make contact, establish credibility, and create name recognition. That's all.
Sample Letters to Create Name Recognition
Dear Mr. or Ms. Whoever:
Alternative letter one:
Enclosed are two complimentary tickets to my upcoming seminar, "How to Help a Loved One Who Might be Facing Foreclosure." I would be honored if you would be my guest, and perhaps share with me-and the attendees, if you desire-your thoughts on a banker's perspective. If you are unable to attend, please feel free to give these tickets to someone else. My seminar is purely educational. No products or services will be offered for sale, nor will attendees be contacted afterwards in order to solicit business.
Alternative letter two:
Enclosed is a copy of my most recent article on "How to Help a Loved One Who Might be Facing Foreclosure." Please feel free to share it with members of your community or civic group who might be interested in the subject. This article does not promote the sale of any goods or services. It is purely educational and offered as a community service. As you can see from reading the article, it does not solicit any business, or promote any particular political, social, or religious agenda.
Closing paragraph for either letter:
Thank you for your time and interest. I look forward to an opportunity to meet with you sometime in the near future and hear your thoughts about successful debt workout strategies for troubled loans.
Mortgage Workout Specialist
Send a series of letters to potential referrers. You want to send about three of these letters, so the lender will start to recognize your name. Don't send the exact same letter each time. (It can start to look like junk mail.)
Ask for Permission to Sell
After the third letter, call the lender and ask for an appointment. Tell him or her that you will need about fifteen minutes of his or her time to talk about your mortgage workout services. This provides enough information to evaluate if he or she wants to meet with you or not, and whether he or she has the time.
Some people will advise you not to tell the lender the purpose of the meeting, because he or she will perceive you as a salesman and give you the brush-off. My opinion is you will just get the brush-off at the meeting if that is what is going to happen. Then it is even harder to overcome resistance, especially when the person feels surprised and ambushed.
In sales, it's always best to get permission to make the sales presentation. Otherwise, you're wasting time, and you can't afford that. Remember, too, you want a reputation as an ethical and straightforward person. You can't earn that by tricking people into meeting with you.
Prepare for your meeting
Before your first meeting, prepare an outline of what you will say. Practice a few times with friends, family, or the bathroom mirror, so you sound polished and smooth, but not memorized.
Structure your presentation so you have the opportunity to use some buzzwords that showcase your knowledge and sophistication. Your presentation to the banker should start with your name and then your experience in giving seminars or writing articles. Tell the lender that you are a mortgage workout specialist. Share the observation that, nine times out of ten, people are too far gone in their troubles to engage in an effective workout to save their property, and they must therefore look at solutions that involve sale of the asset. That's a banker term. It means selling the real estate. It's imperative that you use banker language when talking to bankers. Otherwise, you have no credibility.
Practice on your least likely prospects
If you have several lenders you can meet with, start with the one who is least likely to send you business or least likely to loan you money to buy foreclosures. You want to practice on him or her. It's a freebie, because you're not blowing any opportunities if you mess up.
Leave something in the banker's hands
Give the banker your one-page flyer. Ask if he or she would mind sharing it with people who might be interested in one of your seminars or newsletters.
Don't overstay your welcome, and don't ask for business
Chat for a few minutes, thank him or her for his or her time, and leave. Don't overstay your welcome! The purpose of this meeting is to put a piece of paper in the lender's hand, so he or she will agree to put it in someone else's hands. You do not want the lender doing the selling for you and he or she is not allowed to tell you about defaulted loans.
Send a thank-you note
This is critically important-before the meeting, handwrite a thank-you note, address it, and stamp it. If you wait until after the meeting, you could be delayed or forget. Be prepared. Don't gush-you need about three sentences, tops.
It was a pleasure talking with you today. Thanks for giving me some of your time. I look forward to the possibility of being of service.
Warmest regards, ______
This must be handwritten. Print if your writing is terrible. As you leave the building from your meeting, drop the note in the nearest mailbox. People never send thank-you notes any more. It's a memorable occasion when someone receives one.
Having the lender hand out your flyer is the sale you are trying to make. Everything you have done up to your meeting and what you do after the meeting is all to get the sale. To make it work, you need a flyer. Craft something similar to the following:
Mortgage Workout Specialist
Offering confidential, low-cost consultation services to people having problems with their real estate or home loans.
Free initial interview.
We are not bankruptcy lawyers or high-interest rate lenders.
We do offer advice about a wide variety of alternatives, some of which include:
Creditor Arrangements without Bankruptcy
Fast and Discreet Real Estate Sales
If we can't help you, we can refer you to other ethical professionals in the legal, accounting, and banking fields.
Please call or email for a free initial meeting or for a complimentary copy of our newsletter,
"How to Help a Loved One Who Might be Facing Foreclosure"
[address, phone number, email address]
The process is ongoing. If you don't already do so, start reading the business page of your newspaper. I can't tell you, specifically, what to look for, but you'll start seeing things that are relevant to you. It might be something like an article about money problems a company's having. Perhaps you'll see something about changes in foreclosure laws. It could be any number of things. Get in the habit of reading this section.
In addition, the business pages usually contain a section with press releases for promotions, awards, and other things about local professionals. Cut out any article about bankers on your list. Add the information to your database about that person.
If you happen to have an article about a lender before you have actually contacted him or her, include it in your initial letter.
Include an additional paragraph in your letter saying something like:
By the way, I thought you'd like an extra copy of the newspaper piece about ____________________________. Congratulations!
If you see the lender's name in the newspaper again or after you have had a meeting (unless he or she has been arrested, getting divorced, or something else unpleasant), cut out the article and mail it to him or her, along with your business card that contains the title "Mortgage Workout Specialist." Send new copies of the flyer, in case the copy you have already left has been given to someone else. The goal is to gently, and regularly, remind him or her that you exist, but without any overt sales pitches. When an opportunity comes up, the lender will remember you and give someone your flyer.