The first quarter of 2026 saw foreclosures increase 26% year over year. More importantly, there are hundreds of thousands of homeowners who are now 90 or more days delinquent on their mortgages. Not all of them will end up in foreclosure, but a significant percentage will.

Why More Homeowners Are Experiencing Financial Distress

The circumstances today are different from 2008, but the underlying problem is similar: homeowners can no longer afford their monthly payments.

In 2008, many borrowers had adjustable-rate mortgages with artificially low introductory rates. When those loans reset, monthly payments increased dramatically, and homeowners couldn’t afford them.

Today, many homeowners have fixed-rate mortgages with historically low interest rates. However, their monthly payments are still increasing because property taxes and insurance premiums have risen substantially. Insurance costs alone have increased approximately 70% over the past four years, while property taxes have also climbed.

The result is that homeowners who thought they were financially secure are finding it increasingly difficult to keep up with their payments.

One misconception I hear frequently is that we won’t experience significant foreclosures because homeowners have equity and low interest rates. I disagree. Having equity and a low interest rate doesn’t protect someone who can no longer afford the monthly payment.

Equity doesn’t necessarily prevent foreclosure.

Build Relationships Before the Opportunities Arrive

I want to be positioned before the foreclosure process accelerates. One of the best ways to do that is by building relationships with local real estate agents, REO agents, and community banks.

I believe in making offers constantly. You learn a tremendous amount by submitting offers, negotiating with sellers, and understanding what the market will accept. Don’t sit around waiting for the perfect deal.

I also recommend getting your financing established before pursuing distressed properties. You need the ability to acquire properties, complete renovations, and either sell or hold them as rentals. Having financing or capital partners ready allows you to move quickly when opportunities arise.

Finding Pre-Foreclosure Sellers

My strategy is to contact distressed homeowners before the bank takes possession of their properties.

There is an important distinction between a foreclosure and a pre-foreclosure.

A foreclosure is a property that has already gone through the legal process and may now be owned by the bank. A pre-foreclosure is a property where the homeowner is behind on mortgage payments but still owns the property.

I want to reach these homeowners before the foreclosure is completed. This gives me an opportunity to purchase the property directly from the owner, potentially save them from foreclosure, and acquire the property at a discount.

The lists I focus on include:

• Pre-foreclosure lists

• Notice of Default (NOD)

• Lis Pendens

• Mortgage Default

• Notice of Trustee Sale

These lists identify homeowners who have fallen behind on their mortgage payments or have entered some stage of the foreclosure process.

Where I Get Pre-Foreclosure Lists

There are several ways to obtain these lists, both free and paid.

1. Zillow

Zillow provides a free way to identify some pre-foreclosure properties. You can search for single-family homes and select the pre-foreclosure filter. The results will identify properties that you can investigate further.

2. PropStream

PropStream allows you to search for pre-foreclosure properties and purchase lists of potential sellers. This is one of the services I currently use for obtaining pre-foreclosure data.

3. Exact Data

Their information has generally been very good, although they aren’t necessarily the cheapest option.

4. ListSource

ListSource is another option for creating targeted lists of distressed properties.

I also recommend rotating your data providers periodically. I’ve noticed that if I pull the exact same list from PropStream, ListSource, and other data companies, I get different results from each provider.

Even when the geographic area and search criteria are identical, the lists aren’t necessarily the same. Switching providers periodically can uncover additional prospects and improve response rates.

Skip Trace Your Lists

Once I have my pre-foreclosure list, the next step is skip tracing.

Most data providers can identify distressed properties, but the contact information they provide isn’t always accurate. I don’t recommend cutting corners here.

There’s no point spending time and money identifying the right properties only to call incorrect phone numbers.

I would rather pay a little more for accurate contact information than waste time chasing bad leads. One successful acquisition can easily justify the additional expense.

Contacting Distressed Sellers

Once I have the list and accurate contact information, I begin outbound marketing.

My preferred approach is cold calling, although direct mail is another option. You can make the calls yourself, hire a virtual assistant, or use an automated dialing system.

I use an auto dialer because it allows me to contact substantially more people in less time. A person manually dialing might reach 60–80 numbers per hour, while an auto dialer can potentially process several hundred.

These lists are generally manageable. You might only have 200–300 potential sellers in a particular search area, making it practical to work through the list and follow up consistently.

How I Approach the Initial Conversation

The most important thing when contacting a distressed homeowner is not to sound like a foreclosure predator.

I don’t open a conversation by telling someone I know they’re behind on their mortgage and want to buy their house. That approach is likely to make people uncomfortable and end the conversation before it begins.

Instead, I keep things simple, friendly, and conversational.

I might open with:

“Hi, is this John? My name is Jonathan. I know this call is out of the blue, but I was calling about the property on Maple Street. Did I catch you at a bad time?”

If they ask why I’m calling, I might say:

“We’ve been looking to purchase another property in the area, and your property came across my desk.”

That’s it. I don’t need a complicated sales pitch.

If they ask how I obtained their phone number, I simply explain that I use public property records to identify properties and contact owners directly.

The objective is to start a conversation, not immediately sell someone on the idea of accepting an offer.

Questions I Ask Potential Sellers

Once I’ve established a conversation, I begin asking questions to understand the homeowner’s situation and motivation.

Some of the questions I like to ask include:

• Have you thought about selling the property?

• Would you consider an offer if the numbers made sense?

• What’s your current situation with the property?

• Is the property currently occupied?

• What would ideally happen with the property?

• Have you considered listing it with a real estate agent?

I let the homeowner do most of the talking.

They might explain that they’ve lost their job, are going through a divorce, have inherited a property, or own a rental that needs more repairs than they can afford.

I want to understand their circumstances and determine whether selling makes sense for them.

If they mention foreclosure, I don’t get overly excited or immediately start talking about buying the house. I acknowledge their situation and ask questions to understand how far along they are in the process.

The first conversation is about building trust, identifying motivation, understanding the seller’s timeline, and gathering enough information to evaluate the property.

I’m not trying to close the deal on the first call.

Always Get an Accurate Mortgage Payoff

One of the most important things I do when working with distressed homeowners is obtain an actual mortgage payoff statement.

Don’t rely on what the homeowner thinks they owe or even a recent mortgage statement.

Once payments become delinquent, lenders add late fees, penalties, legal expenses, and other charges. The actual payoff can be substantially higher than the homeowner realizes.

I explain that the title company will need an official payoff letter from the lender before closing.

I ask the homeowner to contact their bank and request a payoff statement good through a date approximately 30–45 days out.

This accomplishes several things:

1. I know exactly how much the homeowner owes.

2. I can determine whether there’s enough equity to complete a transaction.

3. I can establish whether my proposed purchase price is realistic.

4. I avoid wasting time underwriting a deal that cannot close.

For example, if the homeowner owes $150,000 on a property worth $140,000, there’s probably very little opportunity unless the lender agrees to a short sale or another arrangement.

On the other hand, if the homeowner owes $70,000 on a property worth $200,000, I have considerably more flexibility when structuring an offer.

Underwriting the Property and Making an Offer

After the initial conversation, I take the information I’ve collected and underwrite the property.

I run comparable sales, estimate the after-repair value (ARV), calculate the renovation expenses, and determine my maximum allowable offer.

I generally want my maximum offer to be approximately 60%–70% or less of the ARV, depending on the property, repairs, and market conditions.

When making the offer, I use a negotiation strategy that leaves room for discussion.

I initially establish a lower price anchor at approximately 65% of my maximum allowable offer. I then come back with an offer around 85% of that maximum.

These percentages are based on my maximum allowable offer, not the property’s ARV.

For example, if my maximum offer is $100,000, I might initially establish a $65,000 price expectation and then come back with an actual offer of $85,000.

This leaves some room for negotiation while protecting my acquisition criteria.

Two of the most important skills in real estate investing are underwriting and negotiation. You can find plenty of potential deals, but if you don’t know how to evaluate them properly or negotiate effectively, you’ll end up overpaying.

Understanding the Foreclosure Timeline

Timing is extremely important when working with pre-foreclosure sellers. Their circumstances can change quickly, especially after the lender begins formal foreclosure proceedings.

Although the exact timeline varies by state, lender, and loan type, I generally look at the process in several stages.

The earlier stages can last weeks or months. Some homeowners eventually catch up on their payments, while others continue falling behind.

Once formal foreclosure notices are filed, the homeowner’s situation becomes much more urgent. Attorneys become involved, bank notices increase, and the homeowner begins realizing that losing the property is a real possibility.

This is often where I find the best opportunities.

However, I don’t wait until the last minute. Once an auction date is scheduled, there may be very little time left to complete a purchase.

Following Up With Pre-Foreclosure Sellers

I consider follow-up one of the most important parts of this strategy.

Many homeowners won’t be ready to sell when I initially contact them. Some are still hoping to catch up on payments, while others are in denial about their financial situation.

I don’t simply call repeatedly asking whether they’re ready to sell.

Instead, I keep the conversation friendly and continue checking in.

For example:

“Hi John, just touching base about your property. Last time we spoke, it sounded like you were still figuring things out. I wanted to see if anything has changed since then.”

As the foreclosure deadline approaches, I may say:

“John, I know the timing may be getting a little tighter with your property, so I wanted to check in and see if you’re still open to discussing your options before things move further along.”

I also make sure homeowners understand that once the foreclosure process reaches a certain point, their options become more limited.

I generally recommend following up weekly once a formal foreclosure notice has been filed, adjusting the frequency based on the actual deadlines.

The key is to remain helpful without becoming pushy.

Working Directly With the Bank

Sometimes I encounter a homeowner who is already very close to foreclosure.

At that point, I may need to communicate directly with the lender.

I first obtain the name of the bank and explain to the homeowner that I would like to discuss purchasing the property.

However, the bank generally won’t discuss the homeowner’s loan with a third party without authorization.

I may need to obtain a signed authorization allowing the lender to release information and communicate with me on the homeowner’s behalf.

Smaller community banks may be more flexible than larger institutional lenders. Ultimately, I want to establish communication as quickly as possible because the bank’s primary objective is to recover the outstanding debt.

Don’t Overlook Simple Marketing Opportunities

One additional strategy I recommend is letting people know you’re actively buying properties.

I regularly see investors overlook their existing networks.

For example, posting on Facebook that I’m looking to purchase a property in a particular area can generate multiple leads almost immediately.

People can’t send you deals if they don’t know you’re buying.

I also encourage investors to explore free public records and available technology to locate foreclosure notices. Some counties publish notice-of-default information online, and AI tools can sometimes help locate and organize that information.

You can also research property owners’ contact information through free public-record resources, although this generally takes more time and may be less accurate than paid skip tracing.

My Overall Strategy

I believe pre-foreclosure investing offers a tremendous opportunity for investors who are willing to do the work.

Rather than waiting for a property to go through foreclosure and become bank-owned, I want to get in front of the situation and contact the homeowner directly.

My process is relatively straightforward:

1. Identify pre-foreclosure properties using public records or paid data providers.

2. Skip trace the property owners to obtain accurate phone numbers.

3. Contact homeowners through cold calling or direct mail.

4. Establish trust and understand their circumstances.

5. Determine their motivation and foreclosure timeline.

6. Obtain an accurate mortgage payoff statement.

7. Run comparable sales and calculate my maximum allowable offer.

8. Negotiate a purchase price that makes financial sense.

9. Follow up consistently until the homeowner makes a decision.

The important thing is to start building your pipeline now. These lists are generally small enough to work through yourself or assign to a virtual assistant.

I don’t need thousands of leads. I need a handful of motivated sellers with properties that make financial sense.

As foreclosure activity increases, I want to be one of the investors already making calls, building relationships, and putting deals together rather than scrambling to get started after the opportunities become obvious.