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How do you go about finding foreclosures to buy? How do you
find properties that will be foreclosures in the future - so
you can buy them at a cheaper price? Finding great deals on
foreclosures might require a little digging, but it’s
definitely worth it. This article below expands on the ideas
we discussed in our first article,
locating foreclosures, which covers the foreclosure
process and how to buy them.
Below are some tips and tricks on how to buy a foreclosure
and turn it into an income generating property. The goal with
a foreclosure is to find one that doesn't require too much
capital to fix it up and get it rented. But first you need to
figure out how to find a foreclosure listing and what it all
means.
Question: How long does the
foreclosure process take or when will it start for a
homeowner who can't make their mortgage payments?
Answer: This depends upon what state the
homeowner lives in, but usually it takes from 2 to 18
months, although this also depends on the loan terms. More
importantly though, a bank can begin the foreclosure process
if payments aren’t received within 150 days. If you're a
homeowner, and you think you are not going to be able to
make a payment, begin to talk to your mortgage company about
this, the sooner the better.
Among all the methods to obtain foreclosures, you’ll
probably hear most about auctions. Foreclosed properties are
usually sold at auctions which function in basically the same
way as an auction at the county fair or on eBay. The
difference here, however, is that price tags are much higher
and more risk is involved when you're buying a property that
hasn't been inspected.
Poor decision making, lack of knowledge, and excitement
during intense bidding (which leads to overbidding) can be
catastrophic. For this reason, it’s wise to be calm,
realistic, sensible, and most of all patient. You don’t want
to overpay or end up with a piece of property you can’t
afford.
Courthouses provide listings of upcoming auctions, as well
as documents 30 to 180 days before a foreclosure occurs.
According to law, a legal notice must be filed prior to the
finalization of a foreclosure. In most states, a “forcible
detainer” is also filed and can indicate various bits of
information that may help you contact the owner directly:
property address, name of homeowner, amount owed, etc.
Also, notices are written throughout the various stages of
the foreclosure process. This information is recorded by the
county clerk at your County Recorder’s Office and is available
to everyone. All you have to do is visit your county’s office
and search for a Notice of Default (NOD), lis pendens, or a
Notice of Sale. One major advantage to this method is that
you’ll be able to locate properties that haven’t been seen by
online foreclosure data services.
Listed below are other tips to get you in touch with the
right sources.
- Local banks are probably the easiest and most effective
means to locate opportunities. Since most banks are involved
in lending, they can lead you to future open lender sales
and give you information about the applicable properties.
- Lending organizations such as Fannie Mae can be
extremely useful if you can find their local office.
- Government agencies such as the Federal Housing
Authority serve millions of homeowners nationwide and handle
a fair amount of public sales.
You already know your local newspaper is a valuable tool,
but you might wonder, “How exactly can I use it?” For
starters, keep an eye out for ads that state “for sale by
owner” and other related phrases. Sometimes, these listings
are posted by desperate owners who can’t afford to lose money
in a foreclosure. Or, if you wish to take a more active role
(i.e. have the foreclosures come to you), simply post a
listing that advertises you’re willing to buy homes. In this
situation, you buy the home and lease and/or sell it back to
the original owner. If you prefer to purchase the home without
tenants, simply make that stipulation clear in the ad.
Quick Foreclosure Buying Tips :
- See if there are liens on the home
- Tour the home with an expert (If possible, many times
you can't get access to foreclosures)
- Check to see if a broker represents the home
- Hire an experienced real estate agent who has purchased
foreclosed homes before
- Consider the location, yes, in real estate location is
what it's all about. If the property is in an up and coming
neighborhood then value goes up considerably
- Just because the property is cheap, since it's
foreclosed, doesn't mean it's a good deal - there could be
serious issues with the foundation, roof, or other unseen
problems
As we discussed in our first
foreclosures article, REOs can be exceptionally
advantageous. Instead of consulting with the bank to find
REOs, however, it might be easier to work with an asset
management company. These are companies that act on behalf of
investors (companies included), by overseeing purchasing,
development, and property transactions, including
foreclosures. Several of these companies post REO listings on
their websites.
Your goal should be to develop an eye for locating
foreclosures. If you’re familiar enough with an area and
notice properties becoming vacant without a 'For
Sale' sign staked in the yard, you might be in luck. Using a
reverse directory, simply obtain the telephone number for that
property and call the owner, who just might be willing to
sell.
TIP: Be consistent in your search. Don’t
look for a week, then stop looking for two, then resume your
search. By exhausting all of these techniques on a regular
basis, week after week and month after month, you’ll learn to
spot the difference between “same old, same old” and a golden
opportunity.
Plus, in this way you can expand your network, owners of
homes might not want to sell now but perhaps later, or,
companies you manage assests and property will know you're
someone who's looking for foreclosed property, and contact you
when something comes available.
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