Sellers in preforeclosure are some of the most motivated sellers you will find. Their world has been turned upside-down, they are about to lose their house, and their motivation is such that they just want out of the house and the bank off their back.
By buying houses from people in preforeclosure, creating 20%+ equity spreads on houses often in good condition is not a difficult thing to do.
Buying houses in preforeclosure enables the real estate investor to create unusually large equity spreads.
Recent economic uncertainty has caused a ton of foreclosures, and rising rates will cause more in coming years.
If banks had to take back all of the properties that went into foreclosure the FDIC would shut them down. They know this, so they try not to take properties back they don't have to. By requesting the lender discount what is owed on their payoff, large spreads of equity can be created on houses that are totally "under water" with loans.
Because lenders are under pressure to liquidate bad loans rather than take the property back, large discounts can be negotiated.
There are many ways to make some profit in real estate investing. But when you look at how easy pre-foreclosure makes it to buy houses cheap and resell for larger figure profit checks, all the while helping people out of agonizing life circumstances, it makes alot of sense to pursue the most motivated seller in real estate.
If you're trying to work with a real estate agent that has never seen - much less worked with - a real estate investor, the first thing you need to do is have a sit-down meeting to explain your goals, your investing strategy, and your needs.
A real estate agent is a known commodity to the friendly banker. Banks work closely with real estate agents on traditional purchases, so there's an institutional bias that favors the real estate agent.
The bank is more likely to consider an offer that makes sense if it's presented by someone who speaks their language. Here's another thought to consider: If a good real estate agent can help grease the wheels and get your offer in front of a lender, you can get an answer more quickly, and potentially close more deals.
There can also be other perks to working with a real estate agent: research. Once you establish a solid working relationship, a real estate agent will be willing to share information with you that would take much longer for you to do yourself. Comps and other MLS data is available through a real estate agent; however, you don't want to abuse the relationship.
Solid relationships with a real estate agent will open doors for you that may have been securely closed in the past. It makes sense to build relationships that will further your goals, enhance your career, and add real value to your bottom line