Archive for the ‘Foreclosure Investing’ Category
July 22nd, 2009 | 
Author: With the foreclosure epidemic, more and more investors are understanding the importance and the advantage of doing preforeclosure and pre-preforeclosure deals.
Problem is that despite being the hottest ticket in the real estate market today, a lot of investors are still at a loss on what preforeclosure and pre-preforeclosure deals are, much less how to effectively profit from them.
So here’s an ultra-simplified discussion of preforeclosures and pre-preforeclosures and how you can turn them into one consistent cashflow machine for you – especially in the middle of this economic meltdown.
I. Determining the owners of houses in preforeclosure and/or pre-preforeclosure
These homeowners are usually anywhere between 3-6 months (sometimes even up to 9 months) late on their mortgage payments. Some of them may have been kicked out of bankruptcy for not being able to fulfill their obligations within their bankruptcy plan, thus prompting the judge to kick them out of bankruptcy.
These homeowners have properties that are probably around 1-3 months away from being foreclosed on.
One should not confuse preforeclosures and pre-preforeclosures and mix them up. An easy way to determine which is which is, pre-preforeclosures are properties wherein the owner is way behind on his mortgage payments and has little or no hope of ever catching up but has not received a notice of default yet or a lis pendens. Whereas, preforeclosures are properties where the homeowners are way behind on their mortgage payments and have been served a notice of default and a schedule for auction has already been set.
II. Finding out where these properties are
Normally, pre-preforeclosures are pretty difficult to find. These listings are not available to the general public and that’s the reason why not a lot of investors are able to take advantage of them. One option of finding these listings is from lenders. However, the easiest way to access a list of pre-preforeclosures is to get it from www.DoDeals.com .
On the other hand, preforeclosures are easier to access as these are usually available at the local court house. You just need to ask the clerk to give you a list of properties which have been served a notice of default or a notice of trustee sale or has a lis pendens filed against it. Furthermore, there are a number of online list sources which provide preforeclosure listings – some are free (but would probably have less good deals) and some can be had for a fee.
III. Getting in touch with the owners of these homes
When getting in touch with these homeowners, you can either call them up or send them a direct mail or a postcard.
Sites like www.whitepages.com and www.ZabaSearch.com are able to provide contact information for these owners so you can call them up immediately.
If you plan to just send them direct mail or a postcard sent through the United States Postal Service, make sure you use handwriting fonts (or better yet, depending on how many you’re sending out, handwrite them yourself. The reason for this is for your mail to look a lot more personal. Believe it or not, this actually improves response rates.
IV. Here’s what you tell them
When calling the homeowners, you can use this script (or something similar):
“Hi, my name is Tim. I work with a group of real estate investors… We buy 3-5 houses per month in your neighborhood… I’m just calling everyone in the neighborhood and I was wondering if you would consider getting a free cash offer on your house?”
Also, make sure that when you talk to them, you should ask them the following stuff (as detailed in the WOWWW video):
- What is the property worth?
- How much do you owe on the property?
- What repairs are needed on the property and how much?
- Will you sell for what you owe on the property?
- What’s the least you would accept if I can pay all cash and close quickly?
In this stage, it is important for you to hammer down on a price that you’re comfortable with or a price that you believe will be good enough for you to make money on.
Typically, the last bullet above works like a charm in upping the price a few thousand more.
V. Get it under contract
Once you have a price that you’re comfortable with, put the deal under contract.
When going through this stage and you’re not sure about the deal (ie: you feel as if the market value is too low and the asking price is too high, or the property needs more repairs than you expected etc) just go on and put the property under contract but in the special provisions, make sure you put “subject to final inspections” or “subject to partner’s approval” so you have a way out in case you need to back out of the deal.
VI. Exit Strategies
This refers to what you’re planning to do with the property afterwards in order to convert it into cash.
Wholesale – you get the property under contract for as low as you can get it and immediately flip it to another investor for a quick profit. This works in any economy and is considered the easiest way to making money in real estate.
Rehab and Retail or Rent out – purchase the property, fix it up and either sell it retail or hold it as a rental property. Although this exit strategy is usually more profitable, it is not recommended in the present economy.
Subject to - Lease Option – if you get the seller to agree to sell you the property for what is owed on it, you can take over the payments and sell the house using a ‘subject to’ agreement or simply lease it out with an option to buy. This strategy also works today however, it would take a bit more guidance and looking into before newbie investors close deals using this.
You should take note that you don’t simply decide on your exit strategy depending on your whim. You have to take into consideration the prevailing market situation, the profit margin that the property offers you, the capacity of the buyer, the kind of funds that the buyer is bringing to the table and so on.
For more information on how to close deals in the present economy, check out previous post on Investing In Real Estate During A Recession.
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You don’t need to listen to me or any other guru to tell you that today’s hottest area in real estate investing is in foreclosures.
Since the bursting of the housing bubble, more or less 300 million homes have gone or are going into foreclosure. While this may sound like a nightmare to some (especially the homeowners concerned), it definitely poses an extraordinary opportunity for savvy investors to make a huge killing.
The only thing is, you have to know where you can find quality foreclosure listings.
Well, here are a few suggestions:
The MLS
The MLS or Multiple Listing Service is a good source of foreclosure leads.
All you need to do is to do a search of REOs or Foreclosures and in seconds, you can already start picking properties that may suit your fancy.
The problem with the MLS is that only licensed real estate agents have access to it. So if you’re a private investor but not a licensed realtor, you would have to befriend an agent first so you can get access to the MLS.
Real Estate Agents/Realtors
Since licensed real estate agents have access to the MLS, they can be a good source of foreclosure leads. You just need to find one who’s not bent on getting all the foreclosures for himself (which seldom happens since there’re lots of foreclosures or properties going into foreclosure nowadays).
A good way of finding the top foreclosure listing agent in your area is to search for REOs through the MLS (if you’re an agent yourself, you can do this easily. But if you’re not, you can get an agent to do it for you). Once you recognize a listing agent’s name that keeps popping up with a property, you’ve probably hit paydirt.
It would be a good idea to introduce yourself to that agent and start a good working relationship.
Real Estate Signs
When you drive around neighborhoods in search of deals, be on the lookout for signs that read: Foreclosure, Bank-Owned, Bank Repo etc.
Once you see these signs, contact the listing agent named on the sign and make an inquiry about upcoming foreclosure listings. This is because some agents, wait for the bank to set a price for foreclosed properties before putting them in the market. So if you ask for properties that are not yet listed, you’re getting way ahead of other buyers.
Again this calls for a lot of good communication and inter-personal skills.
The County Clerk’s/Local Recorder’s Office
You can get copies of individual recordings of properties that have gone into foreclosure through the County Clerk’s Office. And since these records are considered public documents, you don’t have to pay anything.
You can simply photocopy the recordings you find interesting and go from there. Listings in these offices are usually updated on a regular basis so it can be both a daunting research work or a treasure trove of deals – depending on how you look at it.
Asset Management Companies
Investment Management Companies or Asset Management Companies such as JPMorgan Chase, Capital Group, Northern Trust, Fidelity Investments, Merrill Lynch and Co., Keystone Asset Management, HomeEq Servicing, Premiere Asset Services and others are commonly hired by some lenders (ie: banks, mortgage companies etc) to handle foreclosures on their behalf.
Banks usually do this because of the fact that they are not in the business of owning homes and in the event of a foreclosure epidemic, they would more likely hire an asset management company to handle their foreclosures than to take of it themselves.
The Internet
In the present age of the information superhighway, anyone who knows how to point and click a mouse can get all the information they need from the internet – and foreclosure listings are among these.
Some banks and major lenders usually post their foreclosure listings online for the purpose of having an interested buyer approach them for it. But if you’re really ‘lazy’, there’s a bunch of foreclosure listing websites you can visit to get a hold of this information.
Most of these websites offer trial periods (usually 30 days) during which you can access their website and their foreclosure listings for free. After the free period, you will be charged a ‘subscription fee’ for continued access and usage.
There are sites which offer unlimited free access to foreclosure listings. However, most of these sites provide very little detail and information about the properties. It is always preferable to go for paid websites as the information (and service) they provide are much more in-depth.
An example of such a website is DoDeals.com.
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In all these options, it is important for an investor (especially if you’re just starting in the business) to always be on the lookout for the choice that would give the most bang for your buck.
This is mostly true in subscribing to foreclosure listing websites. As a general rule, you should look for sites that not only offer foreclosures, but also a whole range of other types of leads.
After all, foreclosures may be hot today, but who knows what market will take center stage tomorrow.
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It’s not rocket science.
If you want to cash in on a particular market, you look for an area or a commodity that’s currently hot and you capitalize on that. You observe, you study, you think and you act.
For example, if it’s baseball season, you don’t go out and sell hockey pucks or basketball cards – you sell baseball caps, baseball cards, baseball stuff. If you’re a store owner and it’s summer, you don’t display ski gear, cashmere sweaters or rubber boots – you display and sell beach gear, bikinis and flip-flops.
The same is true for real estate investors.
The current economic crash shows a definite trend. Homeowners (a whole bunch of them) who bought their homes a couple years ago or so with 100% financing or did cash-out refinancing are finding themselves up to their eyebrows in muddy waters. Their home values dropped drastically and now they owe more than what their homes are worth. Result – foreclosures – lots and lots of foreclosures.
With foreclosures at an all-time record high, even banks are finding themselves in a lot of trouble trying to get rid of too many properties in their portfolios – properties they don’t want since it’s not their business to own them, properties that they need to liquidate fast, properties they need to move quickly, properties YOU CAN GRAB AS EASILY AS GRABBING CANDY FROM A CHILD.
Remember, Federal Law requires that banks set aside up to eight times the value of a foreclosed on property for liability reasons (such as if the house gets vandalized or someone goes in and gets hurt and sues the bank etc) from the property. So instead of using that money for other expenditures and investments, the bank is forced to set that money aside until such time that the property in question gets sold at an auction or gets liquidated, one way or another. And they’re required to do that for each and every property they foreclose on. No wonder even banks are starting to get muddy.
Now, if you were the bank and someone offered to take one (or more) of these properties off your hands at a price that’s less than what is actually owed on the property, what do you do?
Do you say ‘NO’ and continue to hold the property until such time that a more reasonable offer is made (which may be in 50 years) and continue to hold a big amount “hostage” for liability costs for the property? Or do you say ‘YES’, and liquidate the property immediately (albeit, at a small loss), “free” the money set aside for that property for use in other investments and ultimately help the economy “move”?
I believe the answer is obvious.
So, as an investor looking to make a killing in the present economy in real estate, where do you think is the money at?
It has been forecasted (conservatively?) that foreclosures will continue to rise all through the following year. Estimates put the number of foreclosed properties year to date at 267 million homes and only a handful (about 37%) have been put in the market so far.
Moreover, realizing the huge potential of the foreclosure market, a lot of private lenders, hard money lenders and the like have been actively joining the ray by providing transactional funding, proof of funds and such other services to investors all over the country just so they can profit from this goldmine too.
In effect, any investor brave enough and smart enough to take the plunge can actually begin making huge profits from these foreclosures without using their own cash or credit.
Now if that’s not yet a clearer than crystal message that foreclosures are today’s millionaire-makers in real estate, I don’t know what is.
Somehow, some broker, some realtor, some investor or someone will make money out of these foreclosures. Why not you?
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Banks are not in the business of owning foreclosed homes. This is why as soon as a bank forecloses on a property, the same almost immediately goes up for sale. And in doing this, most mortgages are usually entrusted by the bank rather than have the establishment mediate the transaction between the closing parties. There are two obvious reasons for this. First off, these banks are more likely to have more money to both loan out a large amount to the property owner, and give value to the asset held up for mortgage. Second of all the bank would be more credible and trustworthy when holding these transactions because, more often than not, it has already established itself in the local or even national and international community.
Let’s take a more detailed look at how a bank foreclosed home goes for sale.
When people need to make a loan involving a large sum of money they usually put up their valuable real assets like houses for mortgage. A contract is then signed as a manifestation of an agreement that the bank would have property rights over the mortgaged assets in as an interest for the money they are meant to collect within an agreed period of time. In the event that the owner fails to pay these debts, the bank sends a foreclosure notice announcing that the owner has lost his or her right to redeem the property, resulting to the repossession of the asset in question. Quite simply, a bank foreclosure.
Once repossessed, they then put up the bank foreclosed homes for sale. The deed signifying the ownership of a specific asset is either sold to a direct buyer or put up for auction. Either way, the proceeds of the sale of the same bank foreclosed house will serve as compensation for the unpaid debt of the owner. Should the proceeds form the sale prove to be insufficient for the total amount due, then the property foreclosed extends to other possibly salable assets that belong to the owner.
Looking for bank foreclosed homes for sale is quite easy. You can either search the internet for online lists of bank foreclosed homes for sale, or you could ask your local banks in the locality for such listings. This way, you get a good look of what’s available at the moment, which could likely be more than enough to let you make an informed choice in the end, should you find yourself torn between a number of these bank foreclosed homes for sale and other real estate opportunities.
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The mortgage crisis has been a nightmare for some and a dream for others. For the people who have lost their homes, it is a sad and life-altering experience. There’s nothing remotely pretty about losing your home to a foreclosing bank. But where they see despair, others see opportunity. These are people looking to make a good investment out of these bank owned foreclosed homes.
With foreclosed homes selling at below market values and interest rates at an all time low, many are looking to invest in the housing market. The problem, however, is how and where to find these bank owned foreclosed properties. Depending on where you live, you may find these bank owned foreclosed homes fairly easy.
One method is to search for bank owned foreclosure listings in various search engines to find these kinds of properties in your area or even across the country. With the ever increasing cost of property, buying bank owned foreclosed properties has become much more socially acceptable, not to mention highly profitable that most are listed online.
This is especially true in metropolitan areas since these areas seem to have been hit the hardest. You’d have no trouble at all finding bank owned foreclosed properties there. If you are a serious investor, aside from just looking for bank owned foreclosed properties in your area, you might want to travel and purchase properties in market hot spots as well. This includes places like Atlanta, Houston or Denver.
Whichever area you prefer, be it within your own backyard or from coast to coast, you have to do your homework in the areas you are interested in. Real estate agents have come up with some unique ways to show their database to online hunters trying to find bank owned foreclosed properties. It used to be quite rare that some realtors would have so many listings of bank owned foreclosed properties at one time, but now it is becoming more and more common.
As such, competition is also rising pretty steeply, which forced realtors to be really creative in their listing practices. Some have sought to offer tours through neighborhoods to show listed properties. It sounds silly, but actually it is a great way to get a look and feel of the neighborhood. If there are properties sitting unsold for long periods of time, you may want to stay away.
Don’t be afraid to ask questions. If you feel that you need to see the property several times before making an offer, go ahead and do that. There is nothing wrong with that. There’s a vast amount of resources that can be found online to help you not just find the location bank owned foreclosed homes, but practically everything you need to learn about these properties as well.
Some of these online sources have listings that cover the whole country, and allows you to narrow down your search by zip code or even by county. This is the easiest and the most popular way to find bank owned foreclosed properties. It is a good thing to remember though to narrow down your search to a few properties prior to contacting an agent. You wouldn’t want to bite off more than you can chew.
The possibilities are endless. No matter what path you take in finding a bank owned foreclosed home, be sure to do all your research and to remember every detail you encounter. Be motivated and organized. This will save you time and money. Don’t purchase a property before you have personally inspected it. Some homes have been trashed by angry owners who do this as their way to deal with the stigma of having a foreclosed home and a ruined credit score. Some of these may not be worth the cost of repairing. You don’t want to be stuck with that problem, so while it pays to be aggressive, it also is a great deal to be prudent. So go ahead and try your hand with these bank owned foreclosure properties. They just may be your ticket to fortune.
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Unless you have been living in a cave for the past decade accompanied only by moss and creepy crawlies, you know what a foreclosure is and that the U.S. Housing Market is currently being ravaged by the sheer volume of houses going into foreclosure. A foreclosure occurs when a homeowner fails to make his monthly mortgage payments as agreed upon with the bank. As a result, the bank that issued the mortgage is forced to take the property back and sell it at an auction in an attempt to recoup its losses. A property taken back by the bank as a result of this default in mortgage payments is called a bank foreclosure property. Now, just in case you’ve been stuck in Jumanji for the greater part of the last five years, there it is in a nutshell.
A great number of these bank foreclosures are available in the market and are considered prime profit sources – that is if you’re not among the misinformed. Some investors stay away from bank foreclosures like plague simply because they don’t understand the money-making potential of these properties. Well, fear not. Here are the top three things you need to know about bank foreclosures:
1. A bank will usually sell for less
One of the best things about buying foreclosed homes is that the bank is eager to sell these properties quickly. Banks, after all are not in the business of owning homes. Furthermore, legislation provides that banks that foreclose on houses should set aside eight times the value of the property to cover for liability risks. This means that these banks that foreclose on properties won’t be able to use that amount set aside for the bank foreclosure property for investments or loans. This is a hassle that most, if not all, banks would not be willing to take so they will, in most cases sell them quickly and sell them cheap. This understanding alone gives you unbelievable leverage in getting banks to sell you these bank foreclosure properties at bargain prices.
2. Bank Owned Homes Aren’t A Mess
A lot of people hold the misconception that bank foreclosure properties are run down and generally in bad shape. While some are, the greater majority are actually not. They are in fact just like any other house you may look if you’re a buyer. The important thing you need to understand about these bank foreclosures is that they’re a great opportunity for you to buy a home cheaply with little or no repairs needed. You should of course still have the property thoroughly inspected, as well as appraised before you buy. The thing is, you don’t have to be biased against bank foreclosure properties. They may mean more money than meets the eye.
3. Regular Home Loans Work For Foreclosures
Another myth about these bank foreclosure properties is that they are available only to those who can afford to hand over a large amount of cash. This is not true. There are investors who buy foreclosed properties cash, simply because they can. But like the rest of us, most prefer to use their liquid assets elsewhere and simply purchase bank foreclosure properties for investment or otherwise using standard credit. Anyone can buy a foreclosure using a regular home loan. After all, there’s no sense buying a house cash if you’re simply acquiring it as an investment property especially if you’re planning to flip it right away. Might as well save your cash for more important purchases.
Although bank foreclosures are not exactly something to cheer for, they prove to be one of the more profitable areas of real estate investing.
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At this time, you’re probably tired of all the brouhaha about the economy being in a tight spot and the real estate industry hitting rock bottom and all those doom and gloom horror stories that would give even, Hannibal Lecter nightmares.
At this time, you’re probably even “tired-er” of them so-called gurus saying, “Hope is not lost! I know the way, the truth and the right tools to earn you money! So whip out your credit card and let’s get to work!” In all fairness, some techniques work, some don’t. There are even times when the technique works, the advise is as good as it gets but the person who’s supposed to do the work is just too lazy or too busy whining.
Bottom line is that more than ever, we are trapped in a state of dog-eat-dog, survival-of-the-fittest kind of business atmosphere that is almost too primeval. And to survive, you don’t really need to go super-complicated or ultra-sophisticated in your strategy. Sometimes – better yet, most of the time, the simplest strategy is your best bet. Sometimes, you just have to go back to the basics. And to this effect, I have two words for you – Wholesaling and Foreclosures.
I know you know the concept of wholesaling. You take a property that’s worth a certain amount, get the owner to sell you the property at a bargain price, you re-sell the property to another person at a higher cost than what you had it for, and you pocket the difference. That’s it! It does not come any simpler than that. And the beauty of this is that it takes very little to get started with this. All you practically need is resourcefulness (learn to use search engines and real estate websites to spot possible prospects), more resourcefulness (scout the properties you find, take pictures, write down addresses, track down owners if possible and keep track of the goodies you come across), a lot of honey on your tongue (convince homeowners and get them to agree to the best possible price), a little bit acid in your veins (talk to angry homeowners and try to convert them) and the determination and drive to succeed (you got to do it over and over again especially if you hit several roadblocks early on).
The problem with some people who try to plunge into the real estate investment business is that they look and expect big results right away. As such, as soon as they get burned the first time, frustration already starts to creep in – and creep in strong. Soon enough, after just a few setbacks, they readily hang the towel and give up. Which brings us to another necessity in this business – or any other business for that matter – the right attitude.
It can not be denied that wholesale deals exist. They may be a lot tougher to find than before, but they’re there – probably around the next bend on the road, or over the next hill or on the next town or whatever. If you know where to look, and I have given you an option earlier, they’re there and you just have to find them.
On that same note, the current economic upheaval has left on its wake a trail of foreclosed properties. If you didn’t know better, you’d avoid these properties like a plague and pray you never come across one you can’t escape.
That’s probably one of the most common misconceptions about foreclosures. Truth is that, foreclosed properties have the tendency to become chests of gold and silver and all manner of treasures.
Now if you don’t know what a foreclosure is except for it being a situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Let me enlighten you a bit on how a foreclosed property can metamorphose into a vault filled with cash. 
You see, banks or lending companies exist for basically one thing, to lend money at an interest so they can make a profit. They’re not interested in accumulating property. Besides, owning a property that the bank does not want in the first place is like living with your parents and your in-laws in one house – they don’t like it and would want to convert the property into cash the soonest possible time in order to settle accountabilities. Moreover, the government requires banks to reserve eight times the value of the house for liability risks – meaning the banks would not be able to use this money readily nor can it be lent out and all.
This just goes to show that banks and lending companies who foreclose on properties usually find themselves owning an unwanted piece of real estate.
In which case, these properties become prime candidates for wholesaling since most of these banks and lending companies would want to cash-in now on the property while they still can and/or to avoid losses in the future. You’d be surprised how many of these banks would be willing to sell these properties at bargain prices just so they can get rid of it and the headaches that come with it.
Also, homeowners in the verge of foreclosures also become perfect seller prospects as most of them would opt to sell the house quickly in order to be able to gather as much cash as they can to buy/rent/mortgage a more affordable residence.
This just goes to show that there are techniques and strategies in real estate that work no matter what the shape of the economy is. You just have to find your angle of attack and press on.
Indeed, as the old saying goes, when the going gets tough, the tough gets going. You don’t have to cry rivers of tears because you think that your real estate business is already kaput. You just have to learn to adapt to the situation and find profit potential where most people think there is none. Again, remember, in the survival of the fittest, it’s usually the simplest organism that has the upper hand. Same is true to this business. In times of difficulty, the simplest approach to solving the problem is to go back to the basics.
Why don’t you check these automated wholesaling real estate tool?
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