Since the NY foreclosure moratorium has been in effect, numerous inexperienced investors in my network have been concerned about their ability to find deals on distressed properties. While it’s true that the foreclosure market in NY has slowed in the past year, 2022 is likely to see a return to normalcy. That’s bad news for distressed homeowners facing foreclosure, but it creates opportunities for real estate investors.
In particular, I think we’re going to see a boom in the preforeclosure market. In this blog, I’ll take you step by step through the process of how to buy a preforeclosure in NY First, let’s define preforeclosure and how it works in NY.
What Is Preforeclosure?
Preforeclosure is exactly what it sounds like—the brief window of time between a homeowner defaulting on their mortgage, and the bank foreclosing on the home. During that time, homeowners must pay back the entire balance of their loan, plus interest and fees, if they want to avoid foreclosure.
In some cases, the homeowner is underwater on their mortgage, which means they owe more than their property is worth. In that case, there’s almost no way they can avoid foreclosure because nobody will want to buy a distressed property for more than the market value. However, if the balance due on their loan is less than their property is worth, they could potentially sell the property for cheap and still pay off their mortgage within the preforeclosure window. That makes preforeclosure homeowners some of the most motivated sellers in the industry, which creates many opportunities for real estate investors.
How Does Preforeclosure Work in NY?
Both national and state laws govern the preforeclosure process. Federal law requires banks to wait until at least 120 days after the first missed loan payment before starting the foreclosure process. Banks are also required to notify homeowners at least 90 days in advance of beginning foreclosure proceedings in NY. So, while preforeclosure theoretically lasts at least 120 days, most NY homeowners only get 90 days warning to pay off their loan. As an investor, that means you generally only have 90 days to close a deal on a preforeclosure property.
How to Buy a Preforeclosure in NY: Tips and Tricks
Now, here are my tips and tricks for how to buy a preforeclosure in NY for investment.
The first step is to find properties in preforeclosure that might make good investments. You can generate leads on preforeclosure properties by:
- Checking legal notices: In NY, both the notice of default and the notice of impending foreclosure are public records, which means you can find them listed at the courthouse, sheriff’s office, or on your city’s municipal website. However, this can be time-consuming, and there’s no guarantee that the homeowner hasn’t already made other arrangements, so I don’t recommend making this your only lead generation strategy.
- Buying lead lists: Public default and preforeclosure records are also aggregated and sold in real estate lead lists. However, lead lists are top-rated, so you can bet that most of your competitors are also using them. Homeowners who end up on lead lists tend to field many unsolicited calls from investors, which can make them feel like the vultures are circling as they go through a complex financial and/or personal crisis.
- Incoming marketing: If a preforeclosure homeowner is getting harassed by unsolicited calls and visits, they’re much less likely to view the deal in a positive light. That’s why incoming marketing—getting distressed homeowners to reach out to you is so effective instead of the other way around. By advertising your services as a preforeclosure investor and getting your name out to local homeowners, you’re ensuring that you’ll be at the top of their list if they find themselves needing to sell their property fast. You might be the first or only investor the homeowner talks to, which means you can avoid getting into bidding wars or losing deals to more prominent investment firms.
Just because a preforeclosure homeowner reaches out to you doesn’t mean their property is worth buying. Many preforeclosure homes are in poor condition because the owner has had financial difficulties maintaining the property. Plus, you need to verify that the house—in its current condition—is still worth more than the homeowner owes on their mortgage.
- First, you need a reliable property valuation tool that lets you plug in details about the home, the neighborhood, and the local market so you can estimate the current value.
- Then, you need to calculate the cost to flip the house, including how much you’ll pay for renovations and holding costs.
- Finally, you’ll have to estimate the after-repair value (ARV), which is the price you’ll be able to sell the property for after the flip.
Using those numbers, you can determine your potential ROI (return on investment) and decide if the preforeclosure home is worth buying.
Closing the Deal
Finally, you need to close the deal as fast as possible, so the homeowner doesn’t miss the foreclosure deadline. Negotiating with a distressed homeowner can be a little tricky—you need to be sensitive to the precarious financial situation they’re in and understand that, while this is just an investment deal to you, this person is potentially losing their family home. Try to present this as a win-win situation: they can avoid the embarrassment and financial hardship of foreclosure, and you can get a fair price on an investment property.
Learning how to generate leads, evaluate properties, and close deals while avoiding the pitfalls can take time. Luckily, there’s an easy way to get started.
How to Buy a Preforeclosure in NY the Easy Way
To successfully invest in preforeclosures in NY, you need comprehensive training, innovative marketing strategies, and intuitive real estate investing tools such as:
- A property evaluation, ARV, and repair cost calculator to help you make smart investments
- Lead pipeline management for acquiring and nurturing preforeclosure leads
- A streamlined listing portal to help you sell your preforeclosure flip faster
You can get all this and more by becoming a HomeVestors® independently owned and operated real estate investment franchise. New franchisees get extensive real estate investing training, the one-on-one mentorship of a HomeVestors® Development Agent, and access to the UGVille® suite of proprietary real estate investing software. Plus, you can take advantage of the innovative “We Buy Ugly Houses® ” inbound marketing campaign to help you find leads on preforeclosures in NY the easy way.
Want to learn more about how to buy a preforeclosure in NY? Reach out and get started today!
Each franchise office is independently owned and operated.