Foreclosure Scout Shares The 'Dirty Tricks And Blatantly Illegal Practices' Of His Job

man at foreclosed property

Photo: Joe Raedle/Getty Images

Foreclosure buyers, the trash collectors of the housing industry, have been raking it in.An anonymous foreclosure scout recently described the “ins and outs, all the dirty tricks, blatantly illegal practices” in a thread at Reddit. In fact as the thread became popular, the source deleted his comments out of concern that his identity would get out. His answers were preserved, however, at Pastebin.com (via Patrick.net).

We’ve picked out the highlights, edited for clarity. We can’t verify the identity of the foreclosure scout, but he sounds legit to us.

Access the house by any means necessary

'Before you go to auction you need to actually scout the houses. It's common for previous owners to gut the house or completely remove the kitchen. It was my job to drive to these houses and assess them, damage, repairs cost etc... Part of this was getting into the house which were many times locked, so we would break & enter all day, every day...

'Many banks will change the locks once the previous owners have been evicted but they only use 5-6 different locks. Somebody in my company somehow obtained copies of these keys which we kept with us, allowing access to many houses that would be too secure for other people to get into.'

Source: Reddit via Pastebin

Make sure the house is empty

'One of the first things we check is if the power is still on. One house, when I checked the meter, I thought it was off. I walked around the back of the house and looked in. It was really messy and there was still a bit of furniture but that was not really very uncommon. I tried the sliding door and it was open, walked in and BAM, family is having breakfast at the table. I read the meter wrong and was in a hurry, oh well. I apologized and just walked out, they didn't say anything just stared at me. I never did find anything too crazy, what I did notice was people would leave a lot of stuff, TV's, Stereos etc... I may have taken a couple dvd's left in obviously vacant houses but nothing else...'

Source: Reddit via Pastebin

The neighbours won't stop you. Just make sure the alarm doesn't go off.

Secure the house

Homeowners play dirty tricks too

'I would have to verify every address I was looking at because people would change the numbers on their house and people would bid on the wrong house. I've had houses that are scheduled for auction but get postponed for months, when they finally do go, we sometimes like to reevaluate the property because last time we saw it was months ago.

There have been times when I recheck and the house is in flames and 30 minutes later I'm watching people bid on it. I have seen houses that were completely stripped, from the smoke detectors, copper wiring, even the strikers on the door frames. People are insane.

'Do people ever smear shit on the walls when they learn they're being foreclosed on?'

'Yes. Burn the house down, yes. Steal everything including doors and moulding. Yes'

'Wouldn't they be held legally responsible for things like that?'

'I'd imagine it would not be difficult to figure out that the person previously living there took all the doors and moulding.

It didn't happen a lot. We almost never bought already stripped houses and never without already knowing. It would actually be the banks' problem to find the previous owners and get their stuff back, they are the owners while in foreclosure. They don't really have time to deal with that though, so they just auction it as is.'

Source: Reddit via Pastebin

Know your margins

'Margins....We would aim for 20% after remodel cost, our expenses and to keep the investors happy. Though I have seen up to 50%+ profit on a lucky day, those are very few and far between.

Like I said, we would shoot for 20% and if during that day, week or month everybody is overbidding at a certain auction site, we would just hang out patiently until the realistic prices returned.'

'So I was basically on the phone non-stop with a person in an office we will call him Bob. Bob could do all the work I couldn't while I was driving around. Estimates were vague, I would look at 50-75 houses a day maybe 5-10 minutes per house. I would determine if the house is occupied or vacant, as well if the occupiers were renters or owners. Check the roof, check the kitchen, does it need paint, does it need carpet.

You know the square footage from the information you had already before you showed up so carpet is easy to estimate. When I say estimates were vague, I mean something like if the house needs a kitchen $10K, new roof $20K. With the number of houses there is no time to go into detail.

Now at the auction site, if I know the houses are dwindling down and I have time to kill, I can talk with Bob. Bob has a network of guys in the company who he can talk with about post flip values. When I'm driving around Bob is looking at my assessments and pictures and he's determining the post flip value.

In general, if you keep your top bid at a 20% profit and you are flipping enough houses you will in the long run average 20% with the gains and losses. It's basically a two-man job, Bob values all my assessments then gives me a top bid number while on the phone at auctions.

Source: Reddit via Pastebin

Bribe the auctioneer

'Sometimes with the little amount of time between scouting houses and and auctions, you can't get to the bank to get actual certified checks. Before you can bid on any house you have to show your cash or checks to the auctioneer so you can't overbid.

Certain people would develop relationships with the auctioneers where they would show fake photocopied checks. If you won the house, you would just meet up with him later to pay, as well as give them a tip.'

'Most high rollers would 'tip' auctioneers, my company would actually write it off on taxes as a 'tip'. If we won a house we would meet up later and give the auctioneer a few hundred bucks. Now nothing was ever discussed about asking the auctioneer to do anything illegal, but when it came looking past not having money on the spot or saying 'going once going twice sold' really fast and maybe not listening too well, the tips came in handy.'

Source: Reddit via Pastebin

You can flip a house in 2 weeks

'It would take an average crew about 2 weeks to flip a house. We were looking for fast and effective, make it look new, make it smell new, make it feel new.

When flipping I would say the 5 most important things are Roof, Kitchen, Carpet, Paint, Fixtures. Now keep in mind everything was to code. If there was some kind of major foundation problem or something, it would certainly get sorted but on average those were the five basic things.

You are selling this house to the wife, if you walk in and there is new carpet, people are stoked, but it also smells like new paint. Those two things seem obvious but it's your sense of smell and the feeling of fluffy new carpet that attracts buyers. Things such as light/sink fixtures are simple to replace and are an easy way to add value. Also those are things people touch, and when they touch it it feels new.

The kitchen, if it needed to be remodeled, would always get stainless, it basically sells itself. Since we remodeled in bulk we had a granite counter guy who could put in granite for nothing because he was doing 20 houses a month for us. Same with carpet, you give a guy 20 jobs a month and his prices will go way down. So for the most part we would use third party but because we offered them so much work the prices are very low. Sometimes when things got slow we would do some of the remodeling ourselves but not too often.

Source: Reddit via Pastebin

What a foreclosure scout gets paid

Things to look for when scouting a foreclosed home

'Well I didn't have to do most of the 'paper' research, It was done buy a guy I spoke with at an office. Much of the information is available on multiple auction websites. I do know that when dealing with verifying the status of the title, we would even outsource that to another guy at a different company who only verified title statuses.

I would wake up before sunrise and receive a list of addresses to scout before auction. I would only deal with the houses directly. First thing to verify is if the address is correct, sometimes people would change their address and what you thought was a great looking house is actually junk. We would use IRS maps and Google maps to verify the properties we were looking at.

Check for problems with the foundation cracks etc.. I would verify that the kitchen is intact, no kitchen.. add 10k to the remodel cost. Other than the kitchen the most expensive thing is the roof, a bad roof would add 20k to the remodel. Everything else in a house is relatively cheap, carpet, paint, drywall, it's not such a big deal. As far as paper trail history....I have never heard of one or seen one.'

Source: Reddit via Pastebin

Don't get played at the auction

Obstacles to getting into the business

'Incredible risk. There are two options, Option 1: Go every day for weeks waiting for the perfect house that you can flip by yourself with little risk. Mind you, there can be 50+ houses for auction a day that had to be scouted before you would dare bid on it.

Essentially is a ton of work for one house, but SOME people do it. Many times, I would see people come in the 'one house at a time' mentality, I'd watch them overbid or make some foolish mistake, and NEVER see them again.

Option 2: Find investors, have your own construction crews, and buy and sell in bulk. Just like anything, it's cheaper in bulk.

We would not waste any time renting etc.. renting IMO is a big headache. We would flip and sell. Occasionally some people in the company would use the resources of the company to buy personal houses to rent but not very often.

I didn't have any formal education, I needed a job and this is what I found, I learned on sight. you could say I'm 'auction street smart'.

Source: Reddit via Pastebin

recognising other scams

'I'm not really sure about that 'we buy houses' sign. I would see those as well when I was driving around, nobody I knew in the business was involved with that.

I always thought those were some kind of scam haha...'

Source: Reddit via Pastebin

Our source no longer works there, but the company is still in business

'Yes, the company I worked for is still very much in business and buys multiple houses a week. The high rollers in the auction/flip game are still doing very well. What I have noticed is the pure number of houses has gone down substantially.

In my area we were having up to 200 houses a day going at auction, it allowed people to be much more risky and the houses would be much cheaper.

These days in the area I worked the number has dropped to maybe 25 a day, it makes for much slimmer picking and people need to be very careful about doing their homework. Last thing you want to do is buy a house with a lower profit margin only to discover the kitchen is gutted and it is within smelling range of a sewage plant.'

Source: Reddit via Pastebin

He doesn't feel bad about working in this industry

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