I’ve been getting a lot of questions about our computer model and how we quickly sift through hundreds of bank foreclosures to find the best ones in under a half an hour. 

The simple answer is that we use information and technology.

You see, as I mentioned in previous writing, through trial and error over the past 11 months we learned that the overwhelming #1 factor in scoring a deal with over $150,000 in equity is to take advantage of the bank’s inefficiencies in accurately determining value on the overwhelming inventory they get. 

…In other words, you have to strike fast and first on the REOs that come out too low.  That’s it- that’s the secret in a nutshell…

The obvious question is how?  If only 1 out of 50 are potential deals on a good day, how can you be sure to be the first to find it?  It’s tougher than it sounds, trust me.

We could never evaluate that many properties in as many hours as there are in the day.  So, here is how we do it: First, having a good foreclosure service is imperative.  (The one we use is Foreclosure Radar.  We used County Records Research for 6 years and changed over this year).  I will go more into detail later about which one you should use, but here is the link to the one we use:

http://radar.infusionsoft.com/go/home/farbelow/1BLG

It is a little bit technical, but when I give a live demo it will make more sense.  First of all, we download ALL foreclosures after they go to the bank for Riverside County on a weekly basis.  By this I mean that we only work on foreclosures that have already been to public foreclosure sale and are now the property of the bank, as opposed to contacting homeowners that are currently in foreclosure (otherwise commonly called, “preforeclosures”)

Homeowners who are in foreclosure DO NOT HAVE ENOUGH EQUITY. Preforeclosures made us a lot of money from 2002 to 2005, but that ship has sailed.  These “gurus” telling you how to make money in  preforeclosures are obviously not slugging it out in the arena, or they would realize it is a momumental waste of time right now. 

Why go that route?  In the foreclosure game you must go to “the land of plenty”, there is not much competition buying bank stuff!…there’s way too many!  Just like in 2004 every single person in foreclosure had equity and there was plenty…make sense?

Anyway, our foreclosure data service is what makes it possible.  You see, not only do they 1) track all foreclosures in the state from beginning to end , they also 2) provide an estimate of value for EACH property via their agreement with Zillow.com (this is the first site I’ve ever seen that can do either, and they do BOTH).  In real estate investing it ALL COMES DOWN TO VALUE.  This ability to have value and be able to export the data is what makes our system possible.  Here’s why:

After we download the foreclosures (with values), we run a program I developed that cross references each foreclosure with the Multiple Listing Service (where the banks list the foreclosures for sale) and we quickly find what the foreclosures are listed on the market for.

Now, we not only have an estimatation of value, but also know the price that it’s currently listed for sale from the broker’s listing service.  Can you see the magic in this?!  With a couple more clicks and a spreadsheet, we can take all 400 properties, divide the listing price (”for sale” price) by the estimated value, and get a ratio of “for sale” price vs. appraisal (Zillow’s appraisal) value for all 400 properties at once! 

Here’s an example: if you had hundreds of foreclosures before you and you set out to try and find the best ones, would you rather research a foreclosure that has an estimated value of $350,000 and is for sale on the open market for $200,000; or would you rather start with a property that has an estimated value of $200,000, and is listed for sale for $350,000? 

Easy decision.  The first example has a list vs. value ratio of .57, the latter example has a list vs. value ratio of 1.75.  With one more click, I can order the 400 properties by this ratio from best to worst, and then work my way down the list!

I hope this makes sense.  It is really a simple model that is tricky to describe.  Now, we’re not talking about perfect accuracy, in fact Zillow can sometimes be horrendously off - but we’re not using the data to make a buying decision, we are simply throwing the odds in our favor.  It will seek out deals many times faster than, “eeny meeny miny moe!”.  So, out of 400 or so properties, we start at the one with the lowest ratio and work our way down the list.  We may never get past investigating #50 on the list, but usually out of the first 50, we’ll SCORE BIG!…

…Combine this with some very creative offer writing (which I will also go more into in the very near future), and you will easily nail a repo that you can quickly flip for tens of thousands of dollars, all for a few hours of work.  My goal is to show our investors how to do this for themselves to identify the winners, and then we can write up the offers for you - win/win.

….stay tuned, I will give more details about the exact programs I use, how to write winning offers, and how to sell your new won prize immediately to an end user OR another investor by throwing an auction. 

If you can’t wait to go play with an amazing foreclosure service (which is mandatory if you are going to be really serious about researching REOs), go to Foreclosure Radar here:

Try looking at the closest 20 foreclosures to you in your neighborhood- just put in your address at the top of the page on the right.  Green tags are homeowner properties in foreclosure, and blue have foreclosure sales coming up.  You want to look for red ones, those are REOs and what we are hunting for:

http://radar.infusionsoft.com/go/home/farbelow/1BLG. 

You can use the full version for free for 7 days with this link.  The usual free trial period is 3 days, but I talked the developer into giving my readers 7 days so you can have more time to play with it.  It is amazing what this state of the art site can do…much more on this (including detailed step-by-steps coming soon)…

…if you notice it says, “Beta4″ at the top.  This means that it is still in development. I’ve been using it since the first beta and I don’t know what more they can do to it, it’s mindblowing.

Be Happy and Prosper,

Kurtis
http://www.FarBelowMarket.com

P.S.  We took some clips of the auction we should have on YouTube soon.