Check the public notices in your area’s legal paper. It is usually published at least weekly.

However, one problem with this is that the location of the property is often given as a legal description. For example, suppose you learn that a certain property is in the foreclosure process, and the location is given as:

Lot 59 of Tract No. 1041 as per map recorded in Block 25 Page 46, in the office of the county Recorder, county of xxxx.

Unless you can translate this into a street address, it’s not of much help.
 

To translate, you’ll need to go to the recorder’s office and look up the description, which will lead you to a map on which streets and addresses can be interpreted. Another alternative is to take it to a title insurance company, where for a fee (or free if you’re friendly with one of the officers) it can be translated.

Perhaps a better solution is to check one of the foreclosure newsletters. These exist in any major and most smaller cities. Here someone has gone to the trouble of checking all of the foreclosure notices. They are republished and not only is the common street address given, but often the phone number of the borrower-seller and that of the lender (along with its address) may also be listed.

Someone has done the legwork for you. However, you’ll have to pay for it. These newsletters frequendy cost $100 or more a month in subscription fees.

Contact Title Companies

Yet another way to find out about foreclosures is to contact title insurance and trust companies, particularly the big ones. Often, they have records indicating who is in foreclosure.

Title companies have these lists because they are frequendy a party to the foreclosure. For example, in states where a trust deed is used, the title to the property rests with a trustee. When the lender (the beneficiary) forecloses against the borrower (the trustor), the trustee puts the property up for sale. Guess who is typically named as a trustee? Right, it’s the title and trust company.

Trustees are usually not individuals but trust corporations. They may be on the books as such for hundreds of thousands of mortgages. And of course, they know when someone is in default.

Some title insurance and trust companies will offer a list of their trustee actions to almost anyone who asks. (It is, after all. public knowledge.) Others are very proprietary and will only pass it out to “friends.” The rule here is to try to know an officer in each of several big title and insurance and trust companies.

How do you get to know an officer? Become a client. As you invest, you’ll be buying and selling a lot of property. Throw your business to a particular officer in a title insurance and trust company, and they’ll be happy to help you in any way they can. Very quickly, you’ll achieve client or “friend” status. Take them out to lunch once in a while. It could pay off with some very handy information.
 

What Do I Say to the Seller?

Okay, you’ve found a property in foreclosure. You like it. You knock on the door. Now what?

It can be awkward. It’s kind of hard to pop in and say. “By the way, I understand you’re losing your property. I want to buy it.” But something that simple can work and produce positive results.

Remember, the borrower-seller is probably disgusted, angry, and perhaps more than a little frightened of the future. Anything that appears to promise a solution is likely to produce a positive reaction.

Besides, honesty is a great policy. Once you’ve found someone in foreclosure, don’t hide the fact that you’re in it to make a profit. We all want to know the other person’s true motivation.

Emphasize that it can be a win-win situation. You can help them get out from under and possibly even salvage a few dollars at the same time that you make a profit. Just keep in mind that you may be the third person this morning who’s made this pitch. Nevertheless, if you’re sincere about helping, are reasonably well dressed, and appear ready and able to make a move, you’ll get your audience.

Once you have the borrower-seller’s attention, ask to see the mortgage documentation. Most people hang onto this, and chances are they’ll have it handy now because of the situation they’re in. (Sometimes the mortgage company will have helped by sending copies.)

Very quickly, try to determine how much the borrower-seller owes to cure the default on the mortgage. Subtract that from the value of the property which you surely determined before showing up by getting a comparative market analysis from an agent, didn’t you?). Keep in mind there could be other liens hidden that the seller doesn’t disclose and which you’ll need to research.

This establishes the seller’s equity. Now subtract your profit and see if there’s enough margin to make any kind of a deal possible.

It may be that the borrower-seller simply owes too much. If that’s the case, then you’ll have to make your apologies and bow out.

On the other hand, if there’s sufficient equity, then determine your profit and, if there’s still enough left, tell the borrower-seller how much you may be willing to give them, after you check out the condition of the title and other liens. The fact that it’s anything at all should make them happy.

If their equity is too small to give them a payout, explain that by taking the property off their hands, you’ll be saving their credit (or much of it). This will allow them to buy another home at some time in the future as well as get other loans and credii cards.

TIP

Sometimes borrower-sellers are afraid to say it, but they just don’t have the money to move out. They could be completely broke. If that’s the case, you may want to pop for their moving costs and, possibly, even the first month’s rent at an apartment. Usually, this is only a grand or so, and it can have two important benefits. It can cement the deal. And it ensures that they’ll be out when you get the property, so you won’t have to worry about evicting them as tenants.

The Bottom Line

Check out the property. Check it out again. If it’s a mess, figure out what’s wrong and what it will cost to put it right.

Check out the title. Be sure you know who actually owns the property. (You don’t want to get a deed from the borrower-seller’s cousin who has no interest in the place and just happens to be staying there rent free when you walk in, but who’ll sell to you for a case of Pepsi).

Be sure you know what other mortgages and liens are on it. It might seem that the borrower-seller has a huge euqity, until you discover that it’s a third mortgage that’s in foreclosure and there are even bigger second and first mortgages on the property.

Trap

Typically, if there is more than one mortgage on the property, the first, which is usually the biggest, will foreclose first (because it has the biggest payments that can’t be met). However, to protect its interest, as soon as the junior mortgage holder (second, third, or whatever) finds out, he, she, or it (if it’s an institutional lender) will then make up the payments on the biggest (first) to get it out of foreclosure and then start their own foreclosure process. This protects their junior interest, and their mortgage usually allows them to add the costs of making the superior mortgage right, onto their loan. That’s why it’s not safe to assume that the lender doing the foreclosure is the only one, or even the biggest or first loan on the property.

Check out the amounts owed. Be sure you sharpen your pencil so you knwo exactly how much money is to be made (and if it’s enough for you to take the risk) before you start.

Check out the laws pertaining to buying from a borrower-seller in foreclosure in your state. You don’t want to do something illegal or anything that can cause you to lose the property later.

Check with an experienced attorney or real estate agent, particularly if this is your first time out. No, it’s not hard. But it is tricky, and you want to be sure you do it right.