Starting a Real Estate Skip Tracing Company: A Comprehensive Guide

Disclaimer: Consult a lawyer before proceeding. This guide is not legal advice and does not cover all aspects of compliance.

Interested in starting a real estate skip tracing company? Skip tracing can be a lucrative venture, but it is crucial to understand the legal and ethical considerations before beginning. This guide provides a step-by-step overview to help you navigate the process. Keep in mind, operationalizing such a company involves significant legal risks, and consulting with legal professionals is highly recommended.

Understanding the Skip Tracing Process

Real estate skip tracing involves locating individuals and their properties, which is essential for various real estate activities such as property recovery, lien collection, and debt resolution. A site like BST - Batch Skip Tracing Tool operates by collecting a large amount of data and profiting from it. However, these tools often skirt the edge of legal compliance, particularly with regards to the Gramm-Leach-Bliley Act (GLBA).

Legal and Ethical Considerations

Before diving into skip tracing, it is crucial to understand the legal and ethical landscape.

1. Complying with the Gramm-Leach-Bliley Act (GLBA)

The GLBA establishes standards for protecting consumer privacy, particularly in the handling of personal financial information. It is crucial to ensure that any data obtained and processed complies with these regulations. Violations can result in significant fines and penalties.

2. Obtaining Necessary Licenses and Permits

To legally access and use data, you must obtain the proper licenses and permits. This can be a complex and expensive process. For real estate, you may need a license that allows data access, even if the primary use is considered less typical. Debt collection licenses are often used as a workaround for real estate applications.

Building Your Foundation

Once legal compliance is established, you can proceed with building your company infrastructure.

1. Choosing Data Sourcing Platforms

Several providers offer data sources, such as Enformion, DelvePoint, or TLO. These platforms can be expensive, ranging from tens of thousands to hundreds of thousands of dollars, and require a minimum guaranteed spend. Ensure that the data source meets real estate needs and is compliant with regulations.

2. Developing Your Website and Workflow

The website should have a seamless user experience. The workflow should be as follows:

Customer uploads a spreadsheet. The spreadsheet is analyzed to determine the row count. The customer is directed to a checkout page for payment based on the row count and the specified rate. VA’s or backend processors run the customer's spreadsheet through data wholesalers and FTP to process the data. Finished sheets are emailed to the customer.

Ensure that the payment system is secure and transparent.

Marketing and Sales Strategies

To attract customers, develop a marketing strategy that emphasizes the importance of data in real estate skip tracing.

1. Social Media Marketing

Utilize social media platforms to reach and engage potential customers. Create content that highlights the benefits of having accurate data in real estate recoveries and liens.

2. Targeting Newbies

Newbies often see data as a foundation and may be willing to invest more in data than they would in other aspects of the business. This can lead to higher margins initially. However, avoid practices that seem unethical or irresponsible, such as inflating the value of data.

Challenges and Risks

Starting a real estate skip tracing company is fraught with risks. Here are some potential challenges:

1. Legal Consequences

Accessing and re-selling data can be a violation of GLBA and other regulations. There is a risk of legal action from regulatory bodies like the ADA (Attorney General) or DA (District Attorney).

2. Data Privacy Concerns

Violating data privacy regulations can result in hefty fines and financial ruin. It is imperative to maintain strict data handling protocols.

3. Maintaining High Margins

As the market matures, it may become challenging to maintain high margins. Ensuring competitive pricing while also ensuring profitability is crucial.

Conclusion

While starting a real estate skip tracing company can be rewarding, it is essential to approach it with caution and respect for legal and ethical boundaries. Always consult a lawyer to navigate the complex legal landscape. Building a successful and compliant company takes time, effort, and a thorough understanding of the regulations.