Real Estate Foreclosures - Part I

How to Find a Foreclosure

You can learn about pending foreclosures through the use of public notices. When the lender posts the notices, you find out the property faces foreclosure before the sale. The notice will provide the address of the property, the amount of the loan, the amount in arrears, and the date of default. You can find these notices in newspapers, legal newsletters, county journals, and on city/county/federal bulletin boards. In addition to these, you can subscribe to lists of seized properties or go online to websites such as http://www.hud.gov/ and http://www.va.gov/. Finding the foreclosure’s first public notice is your first step.

The notice will alert you to negative situations (other claims on the property) that would cause the property to be incumbered more than its current market value. Not all foreclosures are as good a deal as they may seem. The notice is the first place to make this determination. You will also want to research the neighborhood and becoming familiar with the real estate market in the immediate area. Are there many more foreclosures happening nearby? What have properties of similar type been sold for recently? A local realtor can be very helpful with this all your questions.

If you choose to avoid working with the homeowners on a pre-foreclosure basis (as discussed in the previous post) or if the homeowners are not available; you may choose to let the foreclosure happen and attempt to purchase the property through a real estate auction or directly from the lender.

Real Estate Auctions

Do your homework before you attend the auction! I cannot stress this point enough. Check out the property, physically and legally. Decide on your maximum bid before the sale begins. Keep in mind the comps for the neighborhood and the repairs that will be necessary to sell the property. You want this purchase to be profitable. Don't over bid! This can be very easy to do, so don’t get caught up in the excitement of the auction itself.

When you succeed in outbidding your competitors, you will have to pay a deposit or down payment either before leaving the auction or very shortly thereafter. The amount of time you have to pay the balance of the bid will depend on the auction. It is best to be fully aware of all rules and necessary documents needed before you start bidding. Most auctions will require cash or certified funds for the deposit. Have them ready - it would be a shame to lose a great deal because you were not prepared. A good practice is to have your financing set up prior to the sale, with terms you know you can handle. This keeps you from becoming the next victim of foreclosure.

Purchasing Pre-Foreclosures

It is said that when you purchase real estate you always want to “buy low and sell high.” One of the best ways to accomplish the “buy low” ideal is to consider pre-foreclosed properties. Pre-foreclosures are real estate properties that are in the last days before they are repossessed by the lender. The homeowner is still in control of the property; however, the lender will repossess the home if the owner does not attempt to rectify the situation. Usually, if the homeowner can work things out with his/her lender, the pre-foreclosure will be cancelled by the bank and the homeowner will continue as before.

In some cases the homeowner cannot come to an agreement with the lender or, due to the lack of funds, has no choice but to let the property go into foreclosure. This is the point at which you want to approach the homeowner because he/she will listen to just about any offer that you would present. If your timing is right, you can find pre-foreclosures at nearly 50% off market value.

As homeowners are going into foreclosure they face an ugly situation. Their first challenge will be finding a place to live. Second, is the devastation done to their credit rating. Therefore, you can help the homeowner before the foreclosure is finalized. By bringing the note up to date, you assume ownership of the property (through a legal contract between you and the homeowner) and stop the foreclosure process. This gives you choices:

You can allow the family to remain in their home and pay you rent to stay there. You then continue to make the mortgage payments from the rent they pay you.

OR

You can agree to allow them a certain amount of time to find a place and move out. Then you do any repairs that need to be done and sell the property on the open market.

Either way, the homeowner saves the credit rating and is allowed another opportunity to buy again. You make a nice profit. Everybody wins.


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Welcome to my first blog about Realestate Entrepreneurialism

Welcome to my blog about Realestate Entrepreneurialism.