No question, foreclosures are at a record number right now. After a period of aggressive lending, more and more people are finding it impossible to meet their mortgage repayments. The banks and other lenders, in turn, are foreclosing on more and more properties.
I think the banks committed "foreclosure suicide" when they issued some of these adjustable loans and creative loan programs to people who really shouldn't be getting those loans. They are now seeing the fruits of their labor.
Given the crash in property prices across the nation... this means huge opportunities for the savvy real estate investor. So in this article I'll outline the main ways you can make money from foreclosures.
Okay, so what is a foreclosure? Basically, a foreclosure arises where someone who has borrowed money from a bank or other lender to buy a property -- and has given the lender the property as security for the loan -- fails to meet their mortgage repayment obligations... and the lender decides to repossess and sell the property as a result.
There are three main foreclosure investment opportunities, depending on the status of the foreclosed home in the foreclosure process.
The first way to profit is if the property is in pre-foreclosure. At this point, the bank (or other lender) has sent the defaulting mortgagor a certified letter requiring them to make good all their outstanding repayments by a particular date.
If you were to then step in and offer to buy the home from the mortgagor, that would stop the foreclosure proceedings. Many homeowners would rather sell their home at a steep discount to an investor like you -- in the hope they could make a small profit or at least get rid of their debt -- than go through the stress and potentially greater financial loss associated with the foreclosure process. The bank, too, is likely to prefer this outcome.
Some tremendous opportunities are within this specific niche right here. You want to get to these deals as quickly as possible. Even if you don't get the deal right away, followup with the sellers through the foreclosure process--it's worth it!
The second way to make money from foreclosures is when the property is being sold via public auction (or trustee sale). During such an auction or trustee sale, the property must be sold to the highest bidder. Properties being sold at a foreclosure auction are often bought sight unseen, so there are some risks involved. However, if you take this into account when bidding on a particular property -- as well as the fact that the bank is eager to sell -- an auction may give you a terrific chance to pick up a home at a significant discount to its true market value.
Another way to make money from foreclosures is when you negotiate with the bank with a short sale. This is when the homeowner agrees to allow you to work directly with the bank and negotitate the loan balance down. In other words, you are making an offer to the bank for less than their mortgage payment with hopes that the bank will accept your offer and sell the house less than the loan balance.
Short sales are a powerful method to obtain equity on the property just by making an offer directly with the bank.
Finally, if the property is not sold at public auction, the bank must buy the property itself. If that occurs, the bank will usually be more motivated to get the property off its books. This gives you bargaining power!
These bargains are called REO's or Real Estate Owned properties.
So there you have the four of the main and most basic foreclosure investment opportunities in this foreclosure market. With the right strategy in place, and an eye for a good deal, there's no doubt that you can make huge money in this lucrative area of property investing. Now is the time to take action and http://www.thenoteservice.com/ can help you take a quantum leap into this lucrative niche.
Showing posts with label reo listings. Show all posts
Showing posts with label reo listings. Show all posts
Tuesday, March 11, 2008
Sunday, January 6, 2008
Buying A Bank Owned Home (REO)
Is Buying A Bank Owned Home (REO) Property a good move?
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
Subscribe to:
Posts (Atom)
