Investors have learned to read and research auction listings, then communicate with owners about their intention to purchase the property. Even though you may be able to close deals in the courthouse, there are other ways that you can secure distressed properties. This is a good opportunity to get to know the property well and make an accurate analysis.
Imagine an investor gaining access to properties using their contacts and knowledge of residential loans to assist struggling homeowners in negotiating with their lenders. If the loan problems can be resolved, the investor will gain a better reputation with both the owner and lender. The investor may also receive referrals to other problem loans. Because they have the owners' trust, even if the situation cannot be resolved, the investor can become the first to acquire the property. The knowledge of its benefits and drawbacks allows investors to make an educated decision about whether they wish to purchase the property.
Another strategy is to buy distressed loans at a discount rate from the lenders. Some lenders and banks do not like foreclosures. They will often offer several nonperforming loans at a significant discount so that they don't have to take on REO properties. The flexibility of investors can make a non-performing loan more attractive than the lenders. They may be able to turn it into a performance loan which will sometimes command a greater return because they have a lower basis. After the loans have been in good standing for some time, investors can decide whether to hold them or to sell them at an increased price.
In the unlikely event that the loans cannot work out, the investor has the option to foreclose upon the property and take the Title without any competition. This strategy has the disadvantage of requiring a higher capital outlay than purchasing individual properties at an auction. There are creative ways that you can reduce competition to acquire a nonperforming asset.