Real Estate Investing Foreclosures Author: DS Peter
First thing I would suggest regarding foreclosures learn as
much as you can on this subject. Foreclosures are considered to
be very complex type of real estate investing. Second important
thing for the real estate investor is - study the local market.
Be sure and follow up to see what the properties sold for and
how quickly. You need to be an expert on local property values
if you want to be a successful real estate investor, in my
opinion. Where do I find foreclosure or pre-foreclosure deals?
The best way is go to the court house and search the Notices of
Default/NOD and the Trustee's Sale/Foreclosure listings. Other
things you might consider find an experienced agent that will
show you foreclosure listings. They know which web sites offer
up to date foreclosure listings. Start interviewing agents to
find one that is an experienced investor as well, who has done
what you plan to do. When you buy these properties the agent's
commission is paid by the clearing house. The advantage of going
to the court house is you have a good chance to make a deal
before anybody else knows about it. When it is on the Internet,
thousands know about it. If the foreclosure sale is an auction
in your area, start your bid small and see what happens. Know
how far you will go prior to starting the bidding as the
biddings go fast. You might want to start the bid at $2,000,
watch the bidding, keep bidding when needed, and stop your
bidding when it goes over where you are OK at the amount. Get a
foreclosure attorney should you need a help (most likely you
will if you are beginner). Another thing you want to take into
account is the redemption period (if you are doing business in a
redemption state). Some redemption states for example have 6
month right of redemption. Which means the original owner has 6
months to buy back his/her property. It can be even longer if
the house was bought in a year when the redemption period was 12
months before they changed the law and made it 6months. Now the
new buyer (you in our case) will be stuck with 12 month
redemption. Which means you cannot sell during that period. This
in turn can make a huge difference in holding costs for you. To
make it clearer, let's say you bought a house at a foreclosure
auction for $60K on the 2nd of January 200X, the amount owed to
the bank was $30K which they received after the sale and the
owner got his/her check for $30K (minus all expenses in most
states the amount above what is owed goes to the owner). The
former owner comes on the 29th of May year 200X and he/she can
legally buy back the property for $60K (plus all other
transaction costs). If the house was in bad shape and you put
money to fix it, you might consider it gone as well. The
important thing to keep in mind in redemption states is the
redemption date and holding costs (buying right is always a rule
number one in any real estate deal). Now let me show you a
general pre-foreclosure real life case scenario you most likely
will encounter numbers may vary, but the concept is the same. A
note holder (private party or a lender) wants out since the
owners quit paying their mortgage. The balance on the note is
$25,000 and the house is worth about $60,000. (We assume this is
a properly executed and recorded first mortgage.) Offer the note
holder $17,000 to $19,000 for the mortgage (cash, or paper if
the circumstances allow). After you have purchased the mortgage
you will have to get them (the original buyers) to deed to you
in lieu of a foreclosure by offering them some money (offer them
$15,000 or more in our case) to move and deed out or foreclose
on them. Don't forget to get TITLE INSURANCE. (To make sure you
are not getting into some sort of mess, which could be quite
troubling and costly if not noticed on time). Let's say you paid
$19,000 to the bank and $20,000 to the owner that makes $39,000
+ $3,000 closing cost (at the most) = $42,000. You got $18,000
in equity. You can either keep it as a rental or sell it and
make a nice profit. Sometimes the owners won't move out. Here is
very well working trick if you foreclose and the occupants
(works with tenants too if you hold rentals and have the same
issue) do not want to leave. Offer them moving allowance of
$1,000 if they move within 10 days, $800 if they move within 14
days, $600 in 20 days. It won't be long till they leave. The
amount varies based on whatever the deal allows. When you find a
property way below market never take more than 50% of its market
value. Instead share it with the owner. There are some consumer
protection laws and you cannot "unjustly" gain because of
someone else's misfortune. Some states (California for example)
have tough rules, so if you want to play the foreclosure game,
you have to learn and play by the rules. If foreclosures are too
complex for you, there are other ways you can make money in Real
Estate, but if you happen to come across a good pre-foreclosure
or foreclosure deal consult a local attorney who does
foreclosures to guide you through the process. If you want to
invest in foreclosures learning your state's foreclosure law
backwards and forwards is very important. Here are a couple of
links to websites whit articles on Real Estate Investing where
you can learn different techniques from other investors:
http://www.buying-investment-property.info/ and
http://www.realestate-investinginfo.com/. One good thing to
remember which will save you time, money and efforts try to
always work with motivated sellers. Oftentimes the owners in
pre-foreclosure are in denial with their situation and need to
be brought back to reality. You have to know how and what to
talk to them in order to get them sell you the property at your
price. You have to motivate them. There are tricks to the trade.
Learning is a never ending journey. Use the right Real Estate
Forms when you buy and sell. If you don't have any forms here is
a website you can print forms for free:
http://www.realestate-agentsinfo.com/ Good luck! About the Author **************** Copyright © D. S.
Peter is a successful real estate investor for over 14 years.
This article can be published by anyone as long as the reference
box remains intact and all links are kept live.
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