Forty letters, three calls, one house I now rent for 1,695
I wanted income without a second job, so pre-foreclosure was the last thing I expected to end up doing. What changed my mind was realizing I only needed one.
For anyone new, a notice of default is the filing that starts the foreclosure clock. It gets recorded at the county, which is why lists of these names exist. Arrears means the missed payments plus late fees and the lender's costs, and it gets added on top of the loan balance in the payoff figure. Payoff is the single number that makes the loan go away.
I pulled 40 names from one county over two months and mailed each one a one page letter. No mention of foreclosure, no "I saw your notice at the courthouse," just that I buy houses in that area, what I can do, and a phone number. Three people called. One hung up on me politely. One had already listed with an agent. The third was a woman whose husband had left and whose income had halved, 11 payments behind on a 1970s three bedroom that her parents had bought new.
Numbers. Appraisal came in at 235k. I paid 178k. Payoff was 138,400, which included 9,800 of arrears and fees, and she walked from closing with 39,600 minus her share of costs. I put 12,100 into it, mostly a roof patch, a water heater and paint. Rent is 1,695. My loan was 25 percent down at 7.4, and after taxes, insurance, management and a maintenance reserve it clears a bit over 300 a month. Slow money, which is what I wanted.
The part that nearly broke it: her payoff statement had a good-through date, and the title company's request took nine business days to come back. By the time it landed, the auction was 19 days out and the statement expired four days before our closing date. We had to order an updated payoff and the second one was 640 higher because of accrued interest and another attorney fee. Nobody had told me a payoff quote expires. If we'd needed a third one we'd have run out of calendar.
What I'd keep: the letter that doesn't mention why I'm writing, and ordering the payoff the same week the contract is signed instead of when the title company gets around to it.