Wholesaling Pre Foreclosures for Beginners

Pre-foreclosure house
House identified as a pre-foreclosure

Wholesaling pre foreclosures is a win-win real estate strategy that benefits homeowners and investors alike and you can benefit too. By wholesaling pre foreclosures, you can spare homeowners from going into foreclosure, which will hurt their credit and worsen their financial situation.

You can present excellent opportunities for investors, as well as a more affordable option for home buyers. And, you can make money doing it.

Table of Contents

What is Wholesaling Pre Foreclosures?

What is pre-foreclosure wholesaling?

In general, wholesaling is buying more for less. The same is true for wholesaling real estate. But instead of getting more quantity, like at big-box stores, you are getting more value. When a homeowner is unable to make their mortgage payment for three months, they go into default on their loan. This means their mortgage lender submits an official warning that if they do not catch up on their payments, they will be forced to foreclose on the home.

This interim period between defaulting and going into foreclosure is the sweet spot for wholesalers. During this time, you can approach the homeowner with an offer that may very well save the day. Depending on your strategy, you may be able to connect them with a cash buyer or execute an assignment contract with an end buyer in mind.

How Do I Profit from Wholesaling Pre Foreclosures?

How do i profit from wholesaling pre-foreclosures?

As a wholesaler, you get paid for being the middleman. Your service is to connect the homeowner with the buyer. For the homeowner, you are presenting viable buyers that can save them from going into foreclosure.

Investors, you’re typically offering a fix-and-flip opportunity. For home buyers, you’re giving them an opportunity to buy a home for less than market value. In the end, everybody can come out ahead.

For this service, you are paid an assignment fee. The standard assignment fee is $5,000, but that is not set in stone. Sometimes wholesalers charge less, while others charge significantly more. It depends on the situation and the value of the investment.

How Do I Find Pre-Foreclosures to Wholesale?

How do i find pre-foreclosures, buyers, and investors?

There are a few methods to find pre foreclosures. The most common are:

  • Public Records Notices of default are usually filed with the county and are public record. You can obtain a list of pre foreclosures for free at your county records office. But you must do some research to determine the current status and get all of the details on the properties.
  • Real Estate Agents Pre foreclosures are usually listed on the MLS, which real estate agents have full access to. However, the listing prices are typically padded to take the realtor’s commission into account.
  • Online Real Estate Marketplace Online marketplaces, like Zillow and Trulia, offer search filters to find pre-foreclosures. It is another free option; though, the data may be incomplete or outdated.
  • Bandit Signs – The signs you see on telephone poles or on the side of roads. They usually say “we buy houses” or “sell your house fast” etc. They are strategically placed in high traffic areas or areas where you would want to purchase a home. These signs can be ordered online for as little as a dollar a piece. Keep in mind however, that they are illegal to post in some cities, so do your research.
  • List Providers – You can obtain a pre foreclosures list online from various list providers such as ListSource, CoreLogic, and Realeflow. Once you have your list you are ready to send direct mail like yellow letters or postcards to these potential sellers. An added bonus to using a direct mail service is that they also provide templates if you are unsure of what to write on your mail pieces.
Search preforeclosure homes near you

The problem with these common methods is that they are common. Every beginner like you is trying these methods. Fortunately, more advanced options are available, including:

  • Lead Generation Software Real estate investing software ranges from ready-made lead generation websites, like InvestorCarrot, to data-driven lead generation software like PropStream.
  • Real Estate Investor Software Some real estate investing software, like FreedomSoft & REIPro, was designed especially for wholesaling houses. Both FreedomSoft and REIpro help wholesalers and real estate investors find, evaluate, and manage their motivated seller and pre foreclosure leads.

How Do I Approach the Homeowner?

How do i approach the homeowner?

Wholesaling pre foreclosures is an excellent opportunity to turn a profit, but you must remember that it is usually a last-ditch effort for the homeowner to sell their house fast and at a deeply discounted price. Clearly, they have been under financial distress to cause them to go into pre foreclosure. So you must be sensitive to their situation. Also you do not want to embarrass them or make them feel like you are taking advantage of their unfortunate circumstances.

Many wholesalers take a more generic approach that makes the homeowner feel less like a target and more like a client. For instance, instead of saying, “I see your house is in pre foreclosure,” you say, “I’m looking to buy houses in this neighborhood for investors I work with.” It puts the ball in their court instead of you throwing it in their face. Also this strategy will help make the homeowner more apt to listen to what you have to say.

How Do I Find Cash Buyers to Wholesale Pre Foreclosures?

How do i find cash buyers or real estate investors to wholesale pre-foreclosures to?

Once the owner has signed your contract, you need to find the right cash buyer, and you need to do it quickly. Investors are your best bet because they are always looking for a deal and usually have significant cash capital.

As a beginner, you will need to be bold in approaching potential investors and employ several strategies, such as:

  • Networking at foreclosure auctions.
  • Striking up a conversation with traditionally wealthy people, like your doctor or a lawyer.
  • Advertising with Facebook ads, postcards to affluent neighborhoods, car magnets, and more.
  • Using real estate lead generation software that filters for cash transactions.

Don’t be discouraged if a lead is not interested in the property you have available now. If they show any interest at all, add them to your cash buyers list. This will help you build a network of potential investors you can contact with every wholesale deal you have.

Eventually, this long list will turn into a shortlist of dependable investors that you work with the majority of the time. Though you always want to keep your eyes open for new investors.

The key is to start building your list right away and to keep growing it until the day you retire.

Things to Know Before Wholesaling Pre Foreclosures

Wholesaling is a very affordable and viable real estate investment strategy that even the most novice beginner can manage. As with any investment, there are factors you need to be aware of to avoid getting yourself into trouble.

Things to know before wholesaling pre-foreclosures
  • Know your state’s regulations Some states, like Maryland, do not allow you to approach homeowners in pre foreclosure under any circumstances. Other states carefully regulate what you can and cannot do.
  • Avoid Prohibited Properties Assignment contracts are prohibited or restricted for certain property types, such as HUD homes and REOs.
  • Watch Out for Clauses Always be sure to review the homeowner’s mortgage contract, which may include anti-assignment or non-assignment clauses. These clauses may prevent the buyer from making a deal with you, or require them first to get approval from their lender.

In Summary

In summary pre-foreclosure wholesaling for beginners

There are a lot of opportunities for beginners to make good money from wholesaling pre foreclosures. It takes little to no money to begin your endeavor since you are utilizing investor money to make the deal work. With boldness and practice, beginners can quickly gain ground and become experienced real estate wholesalers.

Find more great Wholesaling Houses Info and advice on our real estate investing blog for beginners.

How to wholesale pre foreclosures

Wholesaling Pre Foreclosures FAQ’s

Is it Smart to Wholesale Foreclosure?

Many real estate investors find wholesaling an effective way of entering the business with little capital, especially newcomers looking for pre-foreclosure properties to wholesale. Although wholesale pre-foreclosure properties can be done, success in doing this type of investing requires specific guidance from an experienced source.

Foreclosures occur when homeowners fail to make payments on their mortgage debt that are backed by banks that issued loans in the first place. Lenders can begin the foreclosure process by placing a lien against the home or serving notice of default against its owners.

Home owners then have a set period to catch up payments or sell the property. If they can no longer do so, they can request from their lender either a forbearance agreement or loan modification in order to postpone foreclosure proceedings.

Foreclosure properties usually sell at discounted prices as the owner needs to find buyers quickly in order to meet their mortgage payments and avoid foreclosure and save their credit rating. Therefore, real estate wholesalers must understand the foreclosure process as well as monitor public records for notices of default.

How do you Market a Pre Foreclosure?

How should pre foreclosure marketing work? Real estate investors and agents frequently become aware of homeowners in pre foreclosure because their mortgage payments have stopped and they are at risk of losing their home. Some marketers send a mass letter out, while savvy marketers understand the key to building rapport over time with these owners by providing value over a longer time period.

Some homeowners in pre foreclosure would like to keep their homes, and can work with lenders in order to do so, even though this means evicting themselves. Lenders generally accept loan modifications where missed payments or late fees may be added onto the end of mortgage term or spread over its remaining years – this helps lenders prevent foreclosure deficiencies by keeping loans on their books.

Others may opt to sell their properties during this phase in order to minimize any adverse impact that a foreclosure will have on their credit and financial future, particularly if their mortgages are underwater. They could then sell the property off for less than what is owed to a third party while using proceeds directly towards satisfying debts owed directly to lenders.

Can you Wholesale Non Distressed Properties?

Can You Wholesale Non Distressed Properties? Wholesaling real estate properties is an investing strategy that involves quickly purchasing an undervalued property and then selling it off quickly for a profit to another real estate investor or end user.

Although wholesaling may seem risky, if done properly it can offer great returns. The key is finding quality deals – not only finding motivated sellers, but also buyers and financing sources; so to build your buyers list you should attend real estate investing meetings, network with likeminded individuals or leverage online marketing tools.

Another key part of wholesaling is being aware of local laws. For instance, in New York it’s illegal for an unlicensed individual to sell or buy property; however a licensed real estate agent can facilitate such sales. If unsure how best to structure your transaction it would be wise to consult an attorney first.

While it’s possible to wholesale non distressed properties, it can often be challenging. Distressed properties tend to be in poor condition and may need extensive repairs; finding buyers for distressed properties is also time-consuming if they require extensive marketing or specific investors looking for distressed properties may require marketing directly for distressed properties in a particular location.

Additionally it’s essential that you read and fully understand any purchase and sale agreement terms carefully as an error could incur significant legal fees and may lead you to either losing your deposit or canceling the deal altogether.

Is Wholesaling Real Estate Worth it 2021?

Wholesale real estate investment provides an efficient way to enter the investment arena without needing significant capital. But as with any business, wholesale real estate requires dedication and knowledge of its market; those willing to pursue deals, find undervalued properties and pursue deals aggressively can find wholesale real estate to be an profitable strategy.

Wholesaling involves finding distressed properties for under-market value and entering contracts with investors who will assign or transfer the purchase agreement to new buyers – the difference between original contract price and selling price being the wholesaler’s profit. Wholesaling can be an attractive investment strategy for people without time or funds to find and repair fixer-upper properties themselves.

Real estate wholesalers specialize in uncovering off-market opportunities. Using various methods, they search out sellers motivated to sell – such as homeowners facing foreclosure, people who owe mortgage arrears or neglected inherited properties – then approach these owners through letters and emails, investment events or online communities.

Wholesalers often find the motivation of sellers a double-edged sword; often these sellers are people pushed into difficult circumstances who become highly emotional or even irrational when under stress.

Though wholesale investing can provide many advantages, it may not be suitable for all investors. Individuals who do not enjoy finding off-market deals, have limited real estate experience or lack funds may want to reconsider this investing approach.

Can You Wholesale a Bank Owned Property?

While bank-owned property wholesale deals may not be typical of first-time investors, they can still be highly lucrative if done correctly.

Finding buyers will be key when undertaking such an endeavor – this can be accomplished either through subscribing to email and direct mail lists used by other wholesalers, or using skip tracing services to find potential investor buyers. Once this list of potential investor buyers has been created, then offers must be submitted and properties under contract!

When wholesaling REO, it is essential that you understand banks typically require two separate closings due to contract restrictions that prevent assignment as they would with a private seller. Therefore, having access to an experienced hard money lender or private money lender that can close on the home with you means purchasing it and then selling it at once to an investor buyer at once.

Another thing to keep in mind when searching REO auction properties is that they will likely need repairs before selling at auction, and you should factor the costs into your maximum offer price. In general, offer about 70% of what the house would ultimately sell for after repairs plus your wholesale fee as your maximum offer price.


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