In part 3 of this series on direct mail marketing to find motivated sellers, we began discussing the idea of targeting specific niches in real estate in order to improve our return on investment. Each niche that you choose will usually generate a specific type of lead that fits into one or two particular exit strategies.
For example, targeting probate properties typically unearths a great deal of free & clear homes (no mortgage) that need a lot of updating and renovation. At the risk of sounding like Captain Obvious, this is due to the fact that many of these homes were owned by elderly couples who had paid their homes off over time, but did very little in the way of updates during the period they owned the home. While you will sometimes find mechanical updates (roof, HVAC, electrical, etc.), these homes will typically require a great deal of cosmetic work, such as new flooring, cabinets, bathrooms, etc.
In this post we will focus on two niches that, due to the nature of the seller’s situation, will yield a lot of overleveraged properties that are perfect for short sales. After successful short sale negotiations, an investor could pursue whatever exit strategy fit his/her investing objectives, such as renovation, wholesaling, or buy and hold.
Lis Pendens or N.O.D. – When the foreclosure lawsuit is filed against the homeowner by the lender’s attorney, it is recorded in your county’s public records. In most states, this public filing is known as either a “Lis Pendens” or a “Notice of Default” or N.O.D. Because it is public record, you can search out properties in this predicament, and send them a letter or other marketing piece to try and purchase their home.
The best thing about reaching out to this audience (at least at the time of this post) is that the inventory is PLENTIFUL. While the market has been healing over the past few years, the number of foreclosure filings is still WELL above traditional norms for most markets, and so the opportunity is ripe to pick from what I like to call the “lowest hanging fruit.”
The positive side of marketing to new foreclosure filings is that you typically get a very high response rate as long as your letter is worded effectively. The filing serves as a wake-up call for many sellers who are delinquent on their mortgage(s), and it usually serves as the impetus for them to take action and try to stop the foreclosure.
Bankruptcy – Another niche that commonly yields a large number of overleveraged buyers who need the services of a savvy real estate investor and negotiator are those who are going through bankruptcy proceedings. Filings for federal bankruptcy protection are also public record through an online searchable database know as PACER (www.pacer.gov).
Targeting this niche can also be very effective at generating short sale leads, for many of the same reasons as the Lis Pendens list. Additionally, many investors don’t realize that you can do short sales on properties involved in a bankruptcy, and so they avoid these properties altogether. That opens up a huge opportunity for those who know how to effectively market to this list through direct mail, and guide the homeowners in navigating the short sale process.
What are some other niches that you have targeted with direct mail? Which ones have yielded the highest response rate and/or R.O.I.? Share your thoughts, and let’s keep the conversation going!