3 Methods of Buying ForeclosuresGlen Gallucci
July 10, 2008 — 1,173 views
1) Buying Pre-Foreclosures
Buying pre-foreclosures is one of the best ways to buy foreclosures. This is because it only involves you and the seller. When the homeowner is behind 3 to 4 payments, the lender usually has started the foreclosure procedure. Now is the time for the homeowner to try to sell their house as they are in great jeopardy of losing their home and usually will entertain offers made by real estate investors. Buying pre-foreclosures this way can cut the competition and investors can usually make profitable deals.
• When looking for pre-foreclosures you may want to follow these guidelines.
• Search for homeowners who are in default or delinquent in their mortgage payments.
• Narrow your search to the areas you wish to invest.
• Drive by the properties to see the physical condition. (many will need repairs)
• Contact the owner by mail, phone or by knocking on their door.
• Find out what the owner needs are. (How much money he needs to sell)
• Inspect the property and determine the repair costs.
• Find out what the after repaired value of the house will be. (Can use a realtor)
• Search for any other liens or judgments that may be on the owners that would cloud the title. You must get clear title. You can use a title company for this task.
• Make the owner an offer where you can pay off the lender, give them some cash and still have room to fix the house and sell it for a profit.
2) Buying at the Auction
You can buy foreclosures at the auction in every county. Most will sell for well below market prices. But be careful as some houses are not even worth what the foreclosing lender needs to get in order to recoup their money. Auctions are held at the court house.
When buying houses at the auction, a deposit ranging from 10 to 20% of the bid amount is necessary. This deposit is in the form of a bank check.
You must be aware that buying foreclosures at the auction is also the most risky way of buying foreclosures. You usually can not inspect the house. There could be people still living in it or it is completely boarded up. You are buying the property strictly in “as is” condition. You must do all your homework and investigating before bidding at the sale.
Here are some tips if you are going to buy foreclosures at the auction.
• Get familiar with how the auctions work in your county. It is free to attend and watch how the sales are done and how much deposits are necessary.
• Make sure you have the necessary funds for the down payment and the funds to close within 30 days.
• Estimate the repairs with an experienced contractor or investor. Remember, you might have to estimate repairs you can’t even see from the outside.
• Determine the highest amount you will bid and stick to your plan.
• You will get a new deed with clear title
3) Buying Real Estate Owned Properties (REO’s)
Buying REO’s is really the easiest way to buy foreclosures. Here the foreclosing lender gives the properties to real estate agencies to list their properties for them. Lenders are in the money business and not the real estate business. They don’t want to be bothered with cleaning, fixing or selling the house. And by this time the lender has removed the previous owners and the houses are cleaned up a bit. Now it is easier to inspect and estimate any repairs that will be needed. You can inspect the house with a real estate agent, your inspector, your contractor and your lender.
There is usually no great rush and the whole transaction is an easy way to acquire the property. And don’t be afraid to offer a much lower price on the house. This is how you can get some really good deals. When the lender wants to unload some houses, they take almost any reasonable offer.
The properties owned by the lenders become a big expense as they must maintain the property taxes, insurance and any maintenance required by the town or city. This is what causes the lenders to become very motivated to sell.
REO properties will come with clear title as all junior lien holders would have been foreclosed out of lien.
Glen Gallucci, also known as "A Seasoned Investor" actively buys, rehabs and sells residential properties. He has invested, renovated and built numerous residential and commercial projects during his 30-year career. A well diversified businessman; Glen is also engaged in real estate education. From the trenches, and with his down to earth "tell it like it is" teaching style, makes Glen the "real deal" and a sought after speaker around the country as his business experience proves invaluable for the beginner as well as the seasoned investor regarding the successful structure of starting a wholesale or rehabbing business as well as securing private lenders when investing in "quick turn real estate."