an impending foreclosure sale, whom do you think has the inside track on making a good real estate investment?

Preparation for the Meeting

Obtain All Preliminary Information

Preliminary information includes a copy of the notice of default (if any), a property profile from a title insurance company, and confirmation of property taxes paid or owed. Bring any pictures of the property that you have taken. Bring the comparable sales information you have compiled from a real estate agent or title company.

Include any letters of testimonial you have received from prior transactions. If you also have character letters, bring them, too. Itemize the costs to repair and improve the property to a salable condition. Estimate the costs for holding, marketing, and selling the property. Always include real estate commissions, which can be substantial.

Put together a presentation book, which includes all of this information. Add to it the foreclosure options presentation and questions for the owner. Although you may not use or need all the information at the meeting, we have found it is much better to be overprepared than underprepared.

Questions for the Owner

We recommend you ask and get the answers to the following five questions at the beginning of the meeting. The answers may help you to determine if you should continue on with the meeting or what direction to emphasize during the meeting.

1. Are you aware of the impending foreclosure? You would be surprised at some of the answers we have gotten to this question. Some people stick their head in the sand and want to pretend that everything is going to be all right.

Most people do not know the timeline for the foreclosure process. Some people think they have all the time in the world. We are there to assure them that time is really of the essence for their situation.

2. Do you know what you will have to do to protect your interests? Most people do not have a clue about what they can do to protect their interests in their property. This question introduces the foreclosure options presentation. Some people have a completely mistaken idea of what they can do. Other people are resigned to the fact that there is nothing they can do, even when that isnt true.

3. Are you willing to take the time and effort to fight the foreclosure? When people are facing foreclosure, there may be many other pressing problems occurring at the same time.There may be a job loss or an illness in the family. Just having enough money to buy food and keep the lights on may be a struggle. Having the time, energy, and resources to fight a foreclosure action just may not be possible for them.

4. If we were able to get you cash, would you be willing to sell your equity to us at a discount? This is a testing question. You want the owners to come to grips with the fact that they may have to make a deal. You are also letting them know that you are there as a real estate investor who has to make a profit in order to be able to help them.

5. If you feel comfortable working with us, is there any reason you can see why we couldnt do business? This is a trial closing question. You want the owners to say that if they feel comfortable with you, there is no reason they can see why you couldnt do business. However, the question will also elicit other useful information.

You may discover that the owner is going to deed the property to his brother-in-law for a quick $5,000. The owner is meeting with you because he wants to hear about his foreclosure options besides the brother-in-law route.

Owners may also say that they have an agreement with another investor and want to see if you are going to make them a better offer. Now you know whom your competition is.

At the Meeting

Once we have asked the owners the five questions and gotten their answers, we proceed to the foreclosure options presentation if it is appropriate. We have decided on several occasions to cut short the meeting without making the foreclosure options presentation.

The owners may tell us they will not sell their equity to us at a discount. They may say they already have a deal. They may tell us that they will not do business with us even if they feel comfortable. We may feel we are wasting our time. The point is that you will have to decide whether to stay or go.

Foreclosure Options

There are eight actions the owner can take in response to a notice of default: (1) reinstatement, (2) redemption, (3) deed in lieu of foreclosure, (4) legal delay, (5) bankruptcy, (6) renegotiate with the lender, (7) sell the property, and (8) do nothing. We use the foreclosure options presentation once we are in front of the property owner. We recommend that you put each of these eight options on a separate sheet of paper. We will refer to the Texas and California foreclosure timelines for the time periods to implement these options.

Reinstatement The reinstatement option gives the owner the opportunity to make up back payments plus any incidental charges such a filing or posting notices and trustee service charges. The payment of the reinstatement amount will cancel the foreclosure and enable the borrower to continue as if no default occurred.

In Texas the borrower may reinstate his or her loan within the 20 days from receiving the first official letter from the lender and before receiving the second official letter. Once the borrower receives the second letter from the lender, reinstatement is only possible if the lender agrees to the reinstatement. In the following figure we match the eight foreclosure options with where in the foreclosure timeline they can be done.

Redemption In order to redeem the loan, the borrower must pay off the loan in full. This may be accomplished through refinancing (with a cosigner perhaps) or by a relative or friend bailing out the owner in return for an equity position.

Most states permit redemption up to the foreclosure sale. In California the owner must redeem after they receive the posting at the courthouse and have up to the date of the foreclosure sale, unless the lender agrees to reinstatement.