Article by Mark Walters
The number of homes facing foreclosure continues to grow in many parts of the country. The consensus among ordinary citizens seems to be that a fortune can be made buying foreclosure homes. Is that true or false? The truth is – it’s some of both.
Three and a Half Ways To Buy Foreclosure Properties
Buying real estate foreclosures only produces profits for those who have the knowledge required to recognize and negotiate profitable deals. With foreclosures that’s not as easy as it might seem.
Preforeclosure
The preforeclosure period offers the greatest opportunity for the novice investor. Preforeclosure can be divided into two periods. The first is where a financially distressed home owner realizes he or she will soon be unable to stay current with their mortgage payments.
If you can reach the owner during this period you have a chance to buy the home in the normal way. That is, make your deal with the home owner, get a mortgage loan and go to the close.
Ah, but how do you reach that owner. You target a housing development that first began selling new homes about three years ago. You do that because many adjustable rate mortgages reset to a much high interest rate after three years. As that date approaches many home owners begin to realize they have a problem.
You blanket that development with flyers every 30 to 60 days advertising yourself as a home buyer. Once a week you spend a Saturday afternoon going door to door and asking “Are you the folks that are planning on selling your home? No? Let me leave my card in case you change your mind.”
The second part of the preforeclosure period is at some point after the homeowner has stopped making mortgage payments and the lender has filed a notice of foreclosure (sometime called a notice of default). Now the clock is running and you must move quickly to make your deal before the lender takes the home.
The owner could be as much as six months behind in mortgage payments. You’ll need cash to bring those payments current and stop the foreclosure.
The catch is that many of these homes were purchased as real estate values peaked. Now home values are falling and the home is worth less than the amount due on the mortgage loan. The owner is “up side down” and there is no equity and no profit for you.
If there is equity you have a chance to make a good buy. There is seldom enough time to apply for and qualify for a mortgage loan. You will either need cash or the ability to strike a deal using a lease-option or to buy “subject to” the existing financing. You will need a thorough understanding of those tactics to use them profitably.
Foreclosure Auction
Your next chance to buy is at the foreclosure auction sale. Auctions are cash-on-the-spot sales. Yes, you will need cash, but even more important is the ability to research the
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Tags: Foreclosure, Homes, Smart
