Short Sale Training: How to Find Short Sale Deals

To find short sale deals, a real estate investor needs to understand the situation that leads to foreclosures and short sales.  In other articles, I’ve discussed the definition of a foreclosure, how the foreclosure process unfolds, and how you can buy homes at a discount during this process through a short sale.  This is a terrific way to buy homes for cheap.

Part of the reason this is such a great opportunity is because so many people are defaulting on their mortgages.  Today 2 of every 100 mortgages is a foreclosure.  According to the Mortgage Bankers Association 550,000 to 650,000 mortgages nationwide are either delinquent or in foreclosure.  That number will surely grow in the coming years because of the aggressive lending practices of banks in refinancing houses over the last few years, over financing, negatively amortized loans, the cooling of many real estate markets, high debt through credit cards, the rising divorce rate, the shifting job market and other factors.  The opportunities for short sale experts are going to explode in the next several years.

You can find short sale deals wherever foreclosures are going on and homeowners are distressed. But this begs a big question: “How do I find homeowners facing foreclosure?” I’m going to give you several ways to find distressed homeowners.  What you need remember is that in terms of sheer work, this is about as hard as it gets.  Short sales are remarkably easy to do once you learn the system. Be proactive in finding these people and you will make a lot of money.

Unfortunately there is no official public record of property owners facing financial difficulty.  Distressed homeowners blend well to their surroundings, and like all of us are careful not to show signs of financial stress.  But believe me, they are hiding in plain sight. The extent to which you search for and find short sale deals depends on how proactive you want to be.

Some of your options include:

•    Driving around looking for distressed homes
•    Door knocking
•    Letter writing
•    Foreclosure signs
•    Newspaper ads
•    Foreclosure service
•    The internet
•    Local court records
•    Mortgage broker referral
•    Local REIA groups
•    Bankruptcy attorneys
•    Run your own ads

1. Driving around looking for distressed homes

The boldest action people use to find short sale deals is driving around certain neighborhoods looking for homes with signs of distress. You can actually train yourself to start spotting distressed owners by just driving around this way.  When somebody is in the midst of financial calamity their life starts to show cracks.  Houses are left unkept, lawns go uncut, mail, door-to-door mailers and newspapers pile up, shrubs and gardens look unattended, broken windows don’t get fixed, and houses begin taking a look of being unwanted.  My first house “buy,” a crack house, is the most extreme example of what I’m discussing.  Yet houses like that one are everywhere.

2. Door knocking

The extent to which you find short sale deals depends entirely on your own comfort level. If you’re feeling really bold you can talk directly to the owners by knocking on their doors.  Or you may wish to contact neighbors are perhaps network with door-to-door delivery companies or local utilities to get in touch with the owners.  As a last resort you can use a professional skip-tracing service.  These are all great ways to get direct and instant contact with people who may be facing financial difficulty.

3. Letter writing

Most new investors are not comfortable conducting a face-to-face encounter with a distressed homeowner. I don’t blame you, and in fact would discourage you from that kind of contact until you have more experience.  Finding the homeowner (either through a neighbor or through using the county records) and sending them a letter would be a much better option.

4. Foreclosure signs

When you want to find short sale deals and decide on a good area you might like to farm for leads, place “Stop Foreclosure” signs at busy intersections in the neighborhood.  Keep in mind that nice neighborhoods have the same if not worse foreclosure problems than poorer neighborhoods, so shoot big and get those signs out.  They work.

5. Newspaper ads

Without question one of the best source of finding distressed and motivated pre-foreclosure sellers is the newspaper itself. (Online editions of most newspapers do not carry complete classified listings.  You need to get a real newspaper.)

6.  Foreclosure service

Because of the growing number of foreclosures, services have been formed to provide information about who is receiving their NOD (Notice of Default) and even who is missing payments on a regular basis and falling behind.  For a fee, you can have a lot of detective work done for you.

7.  The internet

You can find short sale deals by doing a great deal of detective work online. For example, most local newspapers now have online editions.  You can very easily scan the legal notices for divorces, lawsuits, and legal actions of all kinds.  Those are typically great telltales of foreclosures in the making. You may also be able to access your local legal news (online or off), which also has extensive listings of lawsuits, divorces, probate’s and other legal procedures that hold opportunities.

8.  Local court records

The local courts are required to keep good records of foreclosure proceedings in your county.  You can hire paralegals and court employees (who are knowledgeable about the system) to work for you on off-hours collecting any information you may want.  This is a superb source of information.

9. Mortgage broker referral

Find short sale deals through mortgage brokers, who know a surprising amount about their past customers.  Develop relationships with some of the successful brokers in your area and you can tap into a great source of “insider” information about who is in foreclosure trouble or who may be heading that way.

10. Local REIA groups

This is an invaluable source of leads for all sorts of investor related needs.  Begin attending these meetings to share ideas and hear the lastest news on what’s emerging in your area.  This is a rich source of action you can’t afford to miss.

11.  Bankruptcy attorneys

Bankruptcy attorneys are an excellent way to find short sale deals because they deal with your target market everyday.  Develop a relationship with several of these, define the sorts of clients you’re looking for and they can funnel select cases that meet your qualifications.

12.  Run your own ads

Be sure to use very direct copy such as “Stop Foreclosure”, “Avoid Foreclosure”,
”Beat Foreclosure”, “Escape Foreclosure” and so on.  Perhaps you could offer a free report to spur calls.  This approach works and should be used along with other tools you are using.