A well organized and professionally run direct mail system will enable you to make contact with property owners in foreclosure as soon as the lender’s notice of “lis pendens” or “notice of default” is recorded in your county’s public records and becomes public information. In order to be successful, you must mail introductory and follow-up letters to all property owners in foreclosure within your buying areas on a regular basis. Direct mail is the quickest, most efficient and safest way to reach them so you can begin the evaluation work on the property.
To contact homeowners in foreclosure by mail you will need to build a big enough data base to have the averages work for you. You may initially send out 200 letters and only have 5 people respond to you. So by adding new people to your list and subtracting those that have resolved their foreclosure position, each month, you will build a working pipeline. Most people do not respond after just the first letter is received. You must build the message in their head, and get them to respond emotionally by sending out your multiple letter campaign.
Remember, people will not be waiting with open arms for you to come to the rescue. They will still be searching for ways to beg, borrow or steal the money to make up the payments. Most owners in foreclosure are usually in a very strong state of denial and are in the avoidance state of mind. You must break their preoccupation with the denial and get them to respond to your offer of help.
Letters appealing to emotion and offering immediate relief get the best response. Property owners whose loans are in default and facing foreclosure usually act more on emotions such as fear, hostility, and anger than they do on logic. Your letters should be written so they offer owners in foreclosure debt relief, cash for their equity, relief from foreclosure on their credit report and help in finding another place to live. Helping them understand the timeline of the foreclosure process, and the options open to them will build their confidence in your ability to help them.
This is where you want to deliver your “Unique Selling Proposition”, and separate yourself from all the other people trying to buy their home, so they call you and not them. Put yourself in the place of the homeowner and ask yourself, how you would respond to your letters and message? If you want your mail campaign to be taken seriously, you should be serious in developing a professional looking letter and USP campaign that will separate you from all the other mail they will receive in regards to their home. Anything less will be a waste of ink, paper, envelopes, and postage. If you cannot write a well-written letter yourself, it might be best if you hired a professional writer to help compose your letters.
The time to send letters to property owners with mortgage or deed of trust loans in default and facing foreclosure is during the loans reinstatement period. The loan reinstatement period is the time period between when a lender declares a loan to be in default and the scheduled public foreclosure auction or trustee’s sale date. Loan reinstatement periods give borrowers the right to cure their loan default by bringing their loan payments current to include the payment of accrued interest, late payments charges, legal cost, and any additional cost incurred by the lender while the loan was in default. Borrowers in default on VA, FHA, Freddie Mac, and Fannie Mae conventional loans have a borrower’s right to reinstate clause in their loan documents that give them the right to reinstate their loans up to five days prior to the foreclosure or trustee’s sale.
Remember that you must get the property owner in foreclosure to:
1. Open your letters.
2. Meet with you face to face.
3. Sell the equity in the property to you at a discount of 50% or more.
Using direct mail to contact property owners in foreclosure is easy to use because you can build a database on your computer and do a mail merge to print the letters in bulk. Having the software change the names automatically and keeping your database organized. I personally use Microsoft Word, Outlook and Business manager to send out my mail campaigns. Direct mail is relatively cheap to use. I can mail out 120 first class letters for about $120. This includes the cost of letterhead, envelopes, and postage. Direct mail is quick, as you can usually get responses from interested homeowners within one to two weeks from the time you mail the letters.
It is best to always send letters that avoid looking like bulk mail. Always use a stamp and not a postage meter. Always sign your letters by hand and if possible handwrite the address on the front of the letter. It will be a bit more work, but increase the chances of your letter being read. The less it looks like a business (bill collector) letter, the more likely their curiosity will be peaked to open it.
At this point, when your property owner contacts you; It will be time to ask the nine questions before you meet with them so you can start your research before you meet with them. If you are prepared and know what position the property is in, you will come off more professional and polished to the homeowner. Remember, prior preparation will avoid poor performance in front of the homeowner.
The nine questions are:
1. When did they make their last payment?
2. How much do they owe their current lender in back loan payments, accrued interest, late payments, and legal cost?
3. Have any of their other creditors filed any judgment liens against them?
4. Have they or are they going to file a bankruptcy petition, and if so when?
5. Has their lender foreclosed on their loan?
6. How much equity do they think they have in the home?
7. Are they willing to sell us the property before they get foreclosed and or evicted from the property?
8. When can the two of you get together and discuss their situation further?
9. Can you look at the condition of the house before you sit down and explain their options?
Once meeting with them, you will need to obtain the loan information from the foreclosing lenders. The fastest way is to have the property owner call lender’s loan loss mitigation department and request it. Now virtually all lenders require that all loan information requests be made in writing by the mortgagor or trustor who is listed in the loan documents as the borrower. By submitting the request through the borrower, it will expedite the loan information verification process and allow you to make a quicker decision about whether the owner has enough equity in the property, along with any physical distress to decide if it’s worth pursuing further.
You will also need them to send a letter of authorization to release loan information, which authorizes the lender to discuss the borrower’s loan information with the third party named in the letter. This will enable you to discuss the loan directly with the person in the lender’s loss mitigation department who is handling the loan. This is also the time when you can probe to see if the lender is open to a short sale of the property.
When meeting with the homeowner in foreclosure you are going to have nine options for them. The nine foreclosure options are renegotiating, reinstate, or redeem the loan, give a deed in lieu of foreclosure to the lender, forensic audit, seek a legal delay, file for bankruptcy protection, sell the property, or do nothing. Some of these foreclosure options are time sensitive. Others require an expenditure of money that the owner probably does not have.
By analyzing the owner’s situation, you can determine the best solution. If they have the ability to get some money, the owner may be able to renegotiate, reinstate, or redeem their loan with the lender. The owner can deed the property to the lender. If they want to hire an attorney, they may seek a legal delay or file bankruptcy. If they have enough time, the owner may be able to sell the property. If the owner does nothing, they will lose the property at the foreclosure sale.