In an earlier post we discussed working with agents and making offers for houses on the MLS. But today we are going to be discussing working directly with sellers to purchase houses, which is very different than buying houses off of the MLS or at a foreclosure auction.
And just to be clear, when I say “working with Direct Sellers” or “working directly with sellers” I mean just that — working with someone who wants to sell their own house, without having a realtor, auctioneer or any other kind of 3rd party involved.
Although it might take a little more to get up and running with this method, working directly with sellers can be very profitable. This is also probably the most “timeless” method to buy houses. Foreclosure opportunities come and go, but there will always be lots of motivated sellers looking to sell their home for a fair price.
One of the reasons working with direct sellers is so profitable is due to the lack of competition. Of course, that doesn’t mean every direct seller is guaranteed to be your exclusive contact, but the odds are generally more in your favor than other methods.
Less competition means a better chance to hit that bull’s eye!
Working directly with sellers also allows more potential for creative financing, which isn’t the case when working with a bank or foreclosure auction. (Good luck buying a foreclosure and requesting for it to be seller financing when you go to pay the bill! 
)
There are a lot of ways to work directly with sellers, but my goal in this post is to share some of the main ones with you. We’ll dive into more details in future posts.
Your List or Target Market
When marketing to direct sellers you will want to start with what is referred to as “your list”. This is just a way of saying the group of people you will focus your marketing efforts on. This can be as narrow and focused as a specific neighborhood, or as broad as several counties or more. It is similar to a farm area, but it is more about the people, whereas the farm area is more about the location.
There are many ways you can go about creating your list but first you need to decide who you want to target. Although it is absolutely possible to buy houses just by focusing on a specific neighborhood, you are going to want to try and focus on people who may potentially be motivated to sell their house.
Some of these may include…
Absentee List (Landlord list)
An absentee list are basically people who own a home but don’t live at that specific property. Most likely they are a landlord.
While there are definitely landlords who are happy with their home and tenants, there are also many who may feel being a landlord is nothing to be excited about. Maybe they bought some guru’s $25,000 course and he told them landlording was easy but didn’t really teach them how to do it. So they ended up buying a house and never learning proper property management skills. You may end up contacting someone right at the time when their tenant just missed the payment for the 3rd time in a row!
Perhaps they are interested in selling? Let’s ask!
Or better yet, maybe the property has been vacant for a few months and is in a state of disrepair. Their once income-producing property is now a financial strain.
Want even more motivated sellers? Try focusing on “out of state” landlords! Its likely they don’t have much contact or time with their property so there will likely be some extra strong motivation to sell.
Of course, the next question you will have is “how do I contact these absentee landlords?“. The company we use is called List Source. (listsource.com) This is a great resource which will allow you to essentially create a custom list. You decide the equity, location or any other metrics you want in a house and they help you create a list of the owners.
Of course, you will have to pay for this list, but once you own it you can use it as many times as you like.
Notice of Default or Notice of Trustee Sale List
Another potentially motivated seller list is the NOD or NOT list. When someone doesn’t make payments on their house for a certain period of time they will receive a Notice of Default and then eventually a Notice of Trustee sale. (In some states this may be referred to as a Notice of Sheriff’s sale.)
Once this is received the individual may be in danger of foreclosure if they don’t bring their payments current in a timely manner. Every state has different laws and timelines regarding foreclosure.
For example, here in California once someone is 90 days delinquent on their payments they can receive a NOD. Then after another 90 days they can receive a NOT. Once they receive their NOT that means a trustee sale date has been set, which is usually 21 days after the date they receive the notice.
Do you think these people will be motivated to sell? You bet they are!
This is the opposite of a motivated seller. Avoid at all costs.
You can either focus on delinquent owners who have equity in their home, or if you are targeting short sale owners you may want to focus on people who have zero or negative equity in their home (which means they owe more than their property is worth). This is another list you can find at List Source but if you are going to be buying a large volume from them you might be better off using a monthly service company.
We use a company that use to be called Foreclosure Radar but changed their name to Property Radar (propertyradar.com). This is a great source to find some high quality lists. Property Radar is not currently in every state so check to make sure you can use them. It runs anywhere from $39 to $59 per month depending on the package you choose.
If Property Radar is not available in your state another alternative is RealtyTrac (realtytrac.com). And as you get more involved in your local market you will probably hear of other foreclosure tracking companies that people like to use in that specific area.
There are some specific laws you need to follow when it comes to dealing with people who are in foreclosure. These laws vary from state to state so you should check them out before taking any action. The laws are set up to protect homeowners who are in distressed situations from being taken advantage of so it’s best to be fully aware. Consult with a legal professional to make sure you have all your bases covered.
I won’t go into too much detail here since buying foreclosure properties is worthy of it’s own post. But if you want to know more, Ward Hannigan in San Diego has a great site called Foreclosure Forum (foreclosureforum.com) where you can research articles and posts or ask questions related to buying foreclosure properties. Ward is a veteran investor, good friend and mentor, and overall just a really great person.
Ward Hannigan’s amazing Foreclosure Forum
Code Violations
Another potentially motivated individual might be someone who is is getting in trouble with code enforcement. This list might be harder to get than most, and very few cities have this list available online, but like my good friend Ward always says, “what’s bad is good and what’s good is bad”, meaning the harder it is to get the list the less competition you will have
Getting this list will be different for every city. Try calling your local city hall or city records office. Go in to the office yourself if you need to. With a little investigative work, you should be able to find out how to get a list of houses that are receiving code violations.
For Sale By Owner (FSBO)
Often times people will attempt to sell their house themselves without the help of a realtor, or without listing it on the multiple listing service. How do you find these people? Just by driving around and looking for “For Sale By Owner” signs in their yards. You can also find them through a list broker. Just google “For Sale By Owner list brokers” and you will find several.
Not all FSBO’s are equal
Probate or Inherited Property List
Now I don’t mean to get morbid here, but as they say there are only 2 things guaranteed in life: death and taxes!
When someone passes away their property often goes through the probate process, which it turns out is part of the public record. And there are many ways you can go about getting these lists.
You can go directly to your county courthouse and write down the information yourself. Or another way is to, once again, work with a list broker. You can even network with attorneys that specialize in probate law.
A couple days ago I just did an incredible interview with Tucker Merrihew (ttmdevelopmentcompany.com) from Portland and we discussed this topic in more detail. I think I got Tucker to share just a little more than he would normally prefer but we had him on the spot and I continued to pry until I got the goods So look for that podcast interview to be released in just a day or two
How to deliver your message
After you have your list you will want to decide which method you are going to use to contact each person. Of course this varies based on what kind of list you are targeting, but there are many ways to go about getting in touch with your prospective seller. Here are a few you can try:
Direct Mail
This is probably the most common method for contacting direct sellers. Just like Dominos Pizza or the Penny Saver, you send a piece of mail to their home and (hopefully) they call you! There are a lot of ways you can go about creating and distributing your direct mail piece.
You can of course send the seller a letter. Your #1 objective here, in order to get the highest level of success, is to get the prospect seller to open your letter! If your letter looks like “junk mail” chances are that is what it will be come and will end up in that little metal receptacle called “the trash”!
To make your letter stand you try personalizing it. Make sure the mailing and return address on the envelope is hand-written. You may also want to use an envelope that stands out from the rest. Other tactics include putting stickers or writing messages or even putting 3-D objects to pique curiosity, but once again we can (and probably will) write an entire post on just this topic alone! There are seminars and books that focus on this one topic alone, but the bottom line is that you want to stand out!
This is definitely a personalized envelope!
The next key to your letter is the message. I won’t get into too much detail but the main thing here is don’t over think it! In fact some of the most popular letters are ones that simply say:
“Hi my name is John Smith and I would like to purchase your home. Please contact me at 555-5555. Thanks”
The key to success here is really just going for it. And then, continually try to test different approaches to see what works. Measure your results and figure out ways to adjust and improve as you go.
One approach is to do what is widely called a “yellow letter”. This is where you take a blank piece of paper (yellow, or any color really) and hand write a letter. Then make copies of that letter in such a way that the copies appear to be handwritten. If you do a search on Google for “Yellow letter”, or look it up on Youtube you will see many examples of how to do this.
If you’re going to write a letter by hand, make sure it is legible!
Or you could just do a typed letter. Really don’t over complicate it and be as real and genuine as possible. You can be detailed or keep it vague, but just be yourself.
Some people put these letters together themselves, and some people hire a company to do it for them. You can search Google for lots of companies who can help you in this area. They may even be able to help you get a list!
You can also use a postcard to get your message across. It’s the same idea — keep the message simple and don’t over complicate it. Test out and adjust as you go. You can find companies that will send postcards for you too. We use a service called Click2mail (click2mail.com), but there are many others too.
When mailing to your list, you will probably want to send more than one mail piece. Usually anywhere from 3 to 7 per person is recommended. Be sure you wait a month or so between mailings too. You could rotate between letters and postcards or, really do it however you like.
Honestly, there isn’t really a science to this. My attitude is that the most important thing you can do is just get going and do something! So many people worry about every specific detail of the process that they never take action! They get burned out before even giving themselves a chance.
Knocking on Doors
Yes! Believe it or not door knocking is another viable way to get properties. In fact this is one of the main ways I got most of my first deals! Although this method is more time intensive, it is much less competitive. And, other than your time and perhaps a tank of gas, it costs very little money to do.
Knocking on doors can be the key to your success!
Once again door knocking could be it’s own post. But just like before my main advice is to keep things simple and just take action! Get your list, put the addresses in your GPS and get going!
Although it’s been over six years I remember it like it was yesterday. I was a little nervous but I knew if I just got into that car the rest would take care of itself! I remember as I walked out the door my wife asked me “what are you going to say when you get to their house?”.
My response was “Well I’m not exactly sure, but I’m pretty sure I’ll figure it out once I’m knocking on the door!”
While I don’t go door knocking today, this method is the one to which I attribute most of my success in house flipping. Why? Because it got me to take action!
Bandit signs and other Signage
You know those little yellow signs on the side of the road that say something like “We Buy Houses”? Those are what is referred to as a “bandit sign”.
This is more of a “shotgun” approach rather than trying to target a specific group. If you Google “bandit signs” you will find a ton of these companies. This is another method I used “back in the day”. I don’t do it anymore but I know a lot of people who have done really well with it.
A traveling bandit sign!
Certain cities are more strict than others about putting up signs and they are often taken down within a few days. Keep in mind that some folks frown on this method so know that there are different opinions here. I don’t necessarily subscribe to one or the other, but I just want you to know that this is a potential option for some of you.
You may also want to consider other forms of “signage” such as putting a message on your vehicle. I even know of people who have purchased a large box truck or other larger billboard type sign and put them out in high traffic areas.
Buy Ads
You can also try to place ads in the newspaper or online. This may or may not work well in your area but is worth a shot! Again, this isn’t rocket science. Write an ad, test out your sales copy and keep adjusting to find a good one.
Internet
If you are more of the techie type, you can try getting traffic through the internet with a website or using social media. If you can get good at SEO (Search Engine Optimization) you can attrack some good, organic traffic to your site. Or you can also pay for traffic to your site by using services that provide pay-per-click ads.
To be honest, online marketing is not something I have really gone into very much, but now that I’m getting more exposure through House Flipping HQ, it is something that I really want to dive in to in the near future. (I’ll keep you posted on how it goes! )
As you can see there is a lot to cover when it comes to working with Direct Sellers, and this is really just the tip of the iceberg. The most important thing is to not get overwhelmed! Although I mentioned many different methods you could try, the reality is that you only need to be good or successful with one or two of them to be able to buy a TON of houses.
We’re just scratching the surface!
Like I mentioned before, the podcast interview with Tucker Merrihew which is coming out in a few days dives really deep in to some of these topics. And as we go forward I will continue to post more details on these areas so you can get an even better understanding of what to do.
In future posts we’ll cover what to do when you get a call from a seller, how to negotiate with sellers, how to make offers directly to sellers and much more! We’re constantly putting out new information to help you with your house flipping journey, so if you want to know about all the educational resources and posts be sure to sign up for the House Flipping HQ newsletter.
The thing is, I realize that you all don’t have time everyday to keep coming back to the website and check for new articles or podcasts, so this is a great way to be notified whenever we put something new for you to learn from.
In the end it’s all about providing the best possible house flipping information you could possibly need to start your own business. So, if there is anything else you’d like to know, just write it down in the comments below and I will add it to the top of the queue for future blogs and podcasts.
Because here’s the deal: House Flipping HQ isn’t about me or my business. It isn’t about the amazing people I interview or their fantastic success stories.
House Flipping HQ is about YOU, and about giving you the tools, information and inspiration you need to take action and build your best possible future!
So if there is any way I can help fulfill that purpose, then just let me know and I will make it happen!
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