Niches That Bring you Riches Pre-Foreclosures

In my last article I talked about Pre-NOD.Today I am going to talk a bit about Pre-foreclosures. The Pre-foreclosure niche is the process leading up to the final day a property in pre-foreclosure is possessed by the bank. This is the time you will reach out to homeowners in order to find out if you can help them with their situation to avoid foreclosure You want to approach the homeowner heading toward foreclosure with a spirit of caring.Your job is to discover what they need and find out if you can help them avoid foreclosure. This is where the book I authored titled, ‘Avoid Foreclosure Following the SMART STEPS Plan’ would be helpful. This book is not only helpful for a person in pre-foreclosure. It will also help you, as a buyer of pre-foreclosure properties, to understand the options that are available to a homeowner. There 18 options a homeowner might consider when in pre-foreclosure as of the time of this writing, (not included are government backed options as those change so quickly). It’s vital for you as an investor to understand the basics of these 18 options covered more in depth in the ‘Avoid Foreclosure Following the SMART STEPS Plan’ book.

  • Options for seller to follow in order to keep their home
    • Pay the delinquency
    • Refinance Current Loan
    • Equity Sharing
    • Hard Money Loan
    • 2nd Mortgage
    • Deferment
    • Loan Forbearance
    • Payment Assistance
    • Re-amortization
    • Repayment Plan
    • Mortgage Loan Modification
    • VA Loan Modification/Refunding
    • Partial Claim
    • Chapter 13 Bankruptcy
  • Options for seller to follow in order to sell their home
    • Private Sale
    • Short Sale
    • Loan Assumption
    • Died in Lieu of Foreclosure
  • Know where to refer sellers for professional help.
  • Being a compassionate listener is as important as knowing the facts about pre-foreclosures.

When you really listen to those going through pre-foreclosure, offering support and encouraging them to find professional help if they would chose to stay in their home, this gives you an opportunity to build trust. Honestly, this is where you can really make a positive difference in a person’s life whether you end up helping them by taking the property off their hands or not. After some due diligence and understanding of the process, the homeowner often comes to the conclusion that selling their house quickly is, in fact, the best decision for them after all. However, it is vital that you do not advise this… only support them on their own decisions.

IMPORTANT NOTE: Unfortunately we live in a litigious society where someone could later sue you claiming, as a result of following your advice, they suffered monetary damages and losses. Be sure and offer disclosures for anything you provide in writing. I suggest you never offer advice, only options. Suggesting legal help is most advantageous when dealing with anyone in pre-foreclosure who wants to keep stay in their home. And ALWAYS check with your attorney on specific laws and requirements.

  • Why are Pre-foreclosures a good niche to consider?
  • Homeowners often must sell their property in order to hope for any financial gain. Of course this is only if the property has equity. If a homeowner cannot make their mortgage payment and the bank takes the house, they lose all money they have paid into their mortgage previously. You are helping them when you can buy it at a profit of any amount of their mortgage liability.
  • It is wise for a person in pre-foreclosure to avoid costly credit liability. A foreclosure will show up on their credit report, where it will remain for up to seven years. Also, every time, forever and ever, a person completes a credit application where the same question is asked, “Have you ever filed foreclosure?” If the answer is “yes”, this will affect the ability to get some types of credit forever. A seller who wants to buy another home after foreclosure will usually end up waiting about 36 months before a lender will offer any kind of loan with an interest rate that makes sense. To learn more about interest rates, look for the link called Interest Rates here:
  • It is much easier and cheaper for a seller to sell to an trained investor with the ability to buy quickly, handling the entire transaction for the seller.
  • You will obtain the property below market value.
  • You are helping people in need of assistance, creating a win-win situation.
  • You’ve got a good possibility of buying the house subject-to or some other creative strategy requiring little out of pocket from a very motivated seller who just wants out.
  • There are thousands of notices of defaults published each month for you to work with.

What are downsides of this niche?

  • You’ve got a limited time (varies state to state) to contact homeowners and get signed contracts, title work, funding, etc. You can find more information on your state foreclosure laws here:
  • Most pre-foreclosure homeowners are in denial about their situation and/or mad at the world due to all their stress and debt collection calls they get. Sometimes you can be blamed for taking their house, when in fact, you are not the problem, but the solution. They were in this situation before you entered their life.
  • Many really good deals are redeemed (caught up) by the homeowner, and the foreclosure cancelled, before the courthouse auction. So when you reach out to those on pre-foreclosure lists, you might be marketing to someone who has found a way to keep their property.
  • Homeowners are overwhelmed with the financial stress, receiving letters and phone calls from bill collectors and often ignore your attempts to reach them.
  • Many are in pre-foreclosure because they have no equity in their property to refinance which could help them hold on to their property a little longer. When there is no equity or negative equity your options to profit from this type of investment are limited and possibly more time consuming.
  • There are some strict laws in many states for dealing with a person in foreclosure. Know your State’s foreclosure restrictions, forms and processes to avoid litigation.
    • Provide contracts, disclosures and paperwork to an experienced real estate attorney for final review – specifically asking for him to point out any laws that are being broken when presenting paperwork to those in pre-foreclosure. Be sure to have your paperwork and processes to be used approved by a real estate attorney.
    • Provide steps you will be taking to market and interact with sellers to your attorney assuring you are following laws for how you are to work with those in pre-foreclosure
  • What are good market conditions to consider this niche?

You want to look for the following market conditions in the area (s) you plan to research and invest.

  • There is a high number of homes in pre-foreclosure
  • Interest rates on loans are high
  • Lenders tightening their belts and not flexible
  • What are bad market conditions where you might want to avoid this niche?

Avoid focusing on this niche if these conditions exist.

  • There is a low number of homes in foreclosures
  • Low mortgage interest rates – allow for lowering payments on refinance
  • Lenders are flexible to work with those who have been late on their payments
  • Houses are upside down – harder to find properties with equity.
  1. Establish Personal Goals
  2. Research Your Market
  3. Research and invest in necessary Tools and Training
  4. Invest in a personal coach/mentor
  5. Establish Your Real Estate Investing Goals
  6. Put together qualified Power team
  7. Market to develop buyers list
  8. Get financing options in place
  9. Purchase a Pre-foreclosure leads list from reputable list company

-While you can often go to your local county courthouse (or visit them online), paying a firm for this outsourced service is a much better use of your time as an investor

  1. Market Yourself (I Buy Houses)
  2. Interact with Sellers
  3. Evaluate Property and Profitability
  4. Develop Exit Strategy
  5. Get into Contract
  6. Rent or Sell it!


Pre-foreclosure lists may be found at the following online resources (The purpose of these references are only to give you some resources to do your own due diligence. I do not endorse these companies.) These are websites offering options for pre-foreclosure leads in most U.S. markets

Now there is so much to know about this market and this article provides a good summary for you to look at this niche. However, I strongly recommend you look to receive more in-depth training and if possible coaching if possible. This will cut your “school of hard knocks” costs down considerably.

Since you made it to the bottom of this post, you are someone who is serious about their desire to know more. I am going to help out a bit.

I am going to offer the first 20 people who purchase – 50% OFF any of the following programs.

Just type in the coupon code 50Percent at check out and hit apply- you will see your discounted price.

To learn more about 12 of the most popular real estate investing niches, please enjoy the articles I have written detailing how to use them and grow your real estate investing business. Enjoy!

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