Buying Real Estate Foreclosures
Posted on September 30, 2008
Filed Under Preforeclosure Properties |
Buying foreclosed properties presents an opportunity for investors as well as someone looking to purchase a home, condo, or lot on which to build, for their personal use. Banks, Savings Institutions, Mortgage companies, Insurance Companies all end up with REO (Real estate owned) inventory that they need to sell to clear off their books. Many lenders will offer special financing to qualified buyers to facilitate a quick transaction
It is important to thoroughly investigate potential purchases. Many foreclosed properties have been neglected and may need significant repairs or rehabilitation. Those costs need to be factored into the purchase price equation. Often vacant properties do not have water, electric or other utilities turned on so it may be difficult to determine whether there are plumbing leaks, electrical or air conditioning malfunctions or other deficiencies. When negotiating a contract on such properties include provisions for inspections with the utilities on before finalizing the transaction.
If the proposed foreclosure purchase is going to require repairs, make sure that you have enough money to adequately undertake the repairs and carry the negative cash flow during the repair process. Some lenders will include “rehabilitation funds” in the mortgage while others may not. Expect the unexpected. There are always surprises during any rehabilitation program, especially foreclosures.
Do your homework prior to entering into any contract. Check with the local zoning department to make sure that the property is still zoned and suitable for the use you intend. Not infrequently, local jurisdictions will rezone unoccupied property, particulary if there have been no utilities for some time. This is particularly likely if a neighborhood is undergoing considerable change or if a property had some special zoning exception “grandfathered”. I auctioned a property for a lender in Jacksonville, FL that had been vacant and without utilites for 2 years. The property had been operated as a small aprtment building with eight (1 bedroom, 1 bath) apartments. In doing our auction preparation we found that the city had rezoned the property from multifamily to single family. We had to auction the property as a single family home. The purchaser had to spend considerable monies remodeling the house, to remove 7 kitchens and end up with a workable single family home. When the original lender made a mortgage on the 8 unit apartment building their “old” appraisal was for significantly more than the single family home was worth. Just because a foreclosure sounds cheap, it doesn’t make it a good buy for you.
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4 Responses to “Buying Real Estate Foreclosures”
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How do you find real estate foreclosures to buy without buying a list from some marketing firm?
Most of these marketing firms generates the same lead info at a high price? Isn't this info part of public information? Is it fairly easy to research and find with alittle effort?
you can go to your county records office,
my county publishes a daily newspaper, that lists all the foreclosures, addresses and $ amounts associated
as far as Foreclosure auctions, I have been to a couple and they are relativly informal. there is a list of properties that were to come to auction that day
many of those properties are taken off the block prior to auction (due to countless reasons including paper work not turned in, property owner working to get current etc…)
once a property is auctioned, there is a minimum price (in my area seems to be about 3-5% above default rate)
if a property is not sold at auction it becomes bank owned real estate.
notes on auction, you have to have the $ or cashiers checks that can be endorsed over I think they prefer the checks so they do not have to walk around with a bunch of $
bank owned realestate I think is offered by one agent that represents the bank, so a regular agent might not know much about bank owned properties.
hope this helps.
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There are several things you need to know when flipping properties.
First of all you should go to the nearest book store, purchase several books on buying, fixing and flipping properties. There are several that you might be interested in.
Once or while you are doing this you should buy one of the TV guru's distressed property programs. These programs will give you some legal forms you might use when writing an offer to purchase a property. You will also find several scripts to use in taking to your potential clients. The also give you tips and a formula on how to figure if you have a property that you can make money from before buying.
If you are without funds to accomplish this business, you will have to find some investors that will assist you. You will have to make a deal with them about a certain percentage of the profits made from the sale of the property.
Normally this is 50/50 however it could be more or less depending on how your relationship is with the investor.
Now you have to determine how you are gonna market yourself to get.
#1 You can purchase a pre-foreclosure list from a list broker (Join the crowd most do this and mail letters to the person that is in foreclosure)
#2 You can advertise in your local paper that you are in the business of purchasing foreclosures.
#3 You can do a direct mail to people in your city stating that you are now in the foreclosure business.
#4 You can do the research at the county recorders office yourself (time consuming and tedious-but workable. You should get enough leads for a least one days work.)
#5 You can select an area of your city that you want to work and target your that area with your energy. You can walk the area pass out flyers that you are now in the business of buying property distressed, divorced and foreclosures as well as probate property.
Pass out these flyers for at least 2-3 months after which you should go to a newsletter of some sort while still explaining that you purchase properties.
After passing out the flyers for 2-3 months you should follow that up with a newsletter to the same area. Check with the post office and inquire about a bulk mailing stamp. This is a more economical way of mailing business matter.
You will want to form a professional team to assist you in your new career field, which should be composed of but not limited to an attorney, cpa, tax preparer, notary public, title rep, real estate agent and others that you feel will make you successful.
They should pass out your business card to their clients that need your services and you should pass out their cards to your clients that need their services
I hope this has been of some use to you, good luck
"FIGHT ON"
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You can check your local newpaper for when the auction is coming.
Then if it does not sell at auction it will go to a real estate agent that handles foreclosures. Check with your local realtor.
Do not buy this list. It is not necessary.
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