Invest in Foreclosed Properties and Make A Killing
Posted on February 2, 2009
Filed Under Foreclosed Properties, foreclosure property listings | Leave a Comment
By D.C. Fawcett, Business Building Coach to the Foreclosure Industry
Whether its owning rental properties, fixing up properties in disrepair, or buying foreclosed properties, real estate investing is still based on similar principles, such as seller motivation. After all, buying quality real estate deals at quality prices consistently means working with sellers who are more motivated.
Focusing ion of the foreclosure side of the real estate investment business, where do most people turn when they seek opportunities in buying foreclosed properties? Sure, they might take a look at foreclosure listings that comes from free or fee-based sources. They can also market their services and attract sellers from whom they can buy foreclosed properties. While these techniques may lead to productive and profitable deals, they also can be time and cash intensive.
Another option for buying foreclosed properties is the world of bank owned real estate. When a property is lost via foreclosure it goes back to the bank and then becomes one of the now thousands of bank owned foreclosed properties (or REO properties) on the market today. How do you start buying foreclosed properties from the bank in your business?
The key is to work with a real estate agent who specializes in bank owned foreclosed properties. With the abundance of bank owned foreclosed properties out there, more and more realtors are realizing that investors are buying foreclosed properties and can provide you with foreclosure listings to aid in your own pursuit.
Despite the leads you can generate from foreclosure listings and the opportunities that exist with foreclosed properties, I think buying foreclosed properties also can be risky for the investor because, without the proper foreclosure training, you run the risk of not really knowing what you are doing. Profits can be lost and so too can opportunities from buying foreclosed properties when you lack the proper real estate investing training.
Whether you’re just curious how to make a little extra money with buying foreclosed properties or really want to pursue a serious business, you owe it to yourself to seize the current opportunity and pursue it.
In today’s real estate market, buying foreclosed properties is as much as part of investing as any other part of the business. Make sure you have a realtor on your team who can provide you with foreclosure listings for buying foreclosed properties because the deals are out there. I also suggest that you commit yourself to real estate training, and your pursuit of buying foreclosed properties will be more productive and more rewarding. I wish you the very best in success in all of your investing pursuits and in business as a whole.
Posted on March 11, 2010
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Posted on March 11, 2010
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Short Sale-a Means to a Good Deal for Buyers and Sellers
Posted on March 10, 2010
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If you can no longer meet the expense of the mortgage payments on your property, a short sale may aid you in avoiding a declaration of bankruptcy or keep your lender from foreclosing on your home. A short sale takes place when your home loan’s lender releases your property’s lien and agrees to accept less money than you owe on the mortgage as a payoff. For instance, if you owe $200,000 on your home, and it sells for $190,000, the lender may consent to $190,000 as payment in full. Keep in mind, though, that some lenders will not agree to a short sale, especially if foreclosure is the better option for them.
What You Should Know About Short-Selling Your Home
Most lenders have particular requirements concerning precisely what documentation they require from those looking for a short sale, though the majority will require a letter of authorization, wherein you give them authority to disclose your personal information. Consider writing your lender a memo granting your permission to consult with others about your loan. Include your full name, the date, the property address, your mortgage number, and the name and number of the real estate agent who is helping you.
Your closing agent or lawyer should additionally prepare for you a initial net sheet. This contains the estimated closing statement with the sale price for your home that you assume you will receive, all the normal costs of sale, the unpaid loan balance, your late payments and fees, and any commissions your real estate agent will accept. You will need to convey this to your lender as well. Send with it a hardship letter that describes exactly how you fell behind in your payments, an honest report of your income and assets, accounting for any savings accounts, stocks, other properties, or articles of real value. Include copies of your bank statements, a comparative market analysis, if required, and a copy of your listing and purchase agreements when your home is put up for sale, and later when you receive an offer. Once your lender has all of your documentation, they will determine whether or not to sanction your short sale.
Understand Risks of Purchasing a Short Sale Property
While the enticement of getting a super deal on a short sale is quite strong, make sure to make inquires on the property before making an offer. To start with, a lender is under no obligation to accept your offer on a short sale listing, even when the seller accepts it, even though the property is listed with short-sale terms. Remember that a lender may have given permission for the short sale to the seller because the seller currently owes more money than the home’s value. This would not make the asking price lower than market value, but instead bring the price of the home in line with other properties in the market. Do some public-records research in order to discover whether the home is being foreclosed, and learn how much the seller owes the lender. This will help figure out how much to offer. When a seller consents to your offer, send a copy of it to the lender for approval and make your offer conditioned upon the lender’s approval. Also, make certain you have the property inspected making your offer contingent upon an acceptable inspection.
Karen B
http://www.articlesbase.com/real-estate-articles/short-salea-means-to-a-good-deal-for-buyers-and-sellers-688478.html
Posted on March 8, 2010
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Posted on March 8, 2010
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Where are Foreclosures Rates Higher?
Posted on March 8, 2010
Filed Under Foreclosed Properties | 6 Comments
Recent economic conditions have had an impact on foreclosures as well. Even though it has been noticed that the number of foreclosures decreased with a small percent, the trend is still maintained at a high level. Each day, more and more homeowners default on their payments and their properties are being repossessed. Banks and other lending institutions are obliged to file for foreclosures, desiring to recuperate the debt as soon as possible.
Compared to the year of 2007, the number of foreclosures has increased by a worrying number. Homeowners are having a hard time paying their mortgage and they find themselves in the situation of facing pre-foreclosure. Some have lost their jobs and have no way to pay. Others have been in default for some time and they have absolutely no possibilities to pay for their loans. Experts appreciate that even more properties are going to be foreclosed the following year.
There are three states that sit at the top of the list when it comes to foreclosures. We are talking about California, Florida and Michigan. Searching statistics for foreclosures by state, one will quickly notice that California occupies number one. The state has an increasing number of properties under foreclosure, the number having doubled since 2007. The situation is probably just as serious in Florida, the number of foreclosures surpassing the one registered in Michigan. As for the state of Michigan, the recently noticed decrease in foreclosed properties has not managed to erase it from the top three states where foreclosure rate is still as high as ever.
Following closely the three states mentioned above, we find an impressive number of territories affected by foreclosures. States like Texas, Ohio, Colorado and Nevada are deeply affected, ranking among the top list. Should we be worried about the number reported when it comes to foreclosures by state? The answer is obvious. Foreclosures happen in all parts of the country, often surpassing the national average. Some states have seen a decrease in foreclosure activity but the registered percent is still worrying.
California, one of the states where foreclosure rates have hit sky-limit, has seen an increase in the past few weeks. Analyzing foreclosures by state, we notice that the same thing has happened in Michigan where the number of foreclosures has increased with over 20%. As for the cities where foreclosure activity is intense, California and Florida cities occupy most of the places on the top 10 list. More recent data shows that one in ten properties is in default, with an even bigger number when it comes to properties that are already in foreclosure.
We could analyze foreclosure activity and trends by city, state or top ten lists. Searching foreclosures by state, there are numerous states where homeowners default on their payments and are unable to prevent repossession. Some cities have a higher rate, others have managed to keep it at a steady level. One thing is certain: the situation was not as concerning in 2007. As we approach a new year, it becomes clear that we need to take a closer look at foreclosures by state and identify possible solutions!
Jhoana Cooper
http://www.articlesbase.com/real-estate-articles/where-are-foreclosures-rates-higher-699172.html
Traps for the Unwary in Distressed Debt
Posted on March 6, 2010
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Distressed debt, including real estate mortgages, are now attractive to many smart investors.
For example, John Paulson, who runs the $36 billion hedge fund firm Paulson & Co, is looking to buy distressed mortgages and distressed debt, despite being bearish on the overall economy, Bloomberg reported. Paulson wrote in a 2009 outlook to investors that he is interested in investing in debt restructurings, bankruptcies, strategic mergers and financial recoveries. Paulson’s opinion is entitled to great weight as he made billions betting the subprime market would crash and was one of the few to get it right.
Economic Outlook Favors Distressed Debt
Distressed investments are good values during bad business times and bad periods in the credit cycle where there is a bad economy, a bear market in stocks and increasing defaults. As we can easily see, distressed assets are now in favor. Conventional knowledge rightly suggests that in a period of economic contraction, debt, rather than equity, is a good investment strategy.
Risks of Distressed Debt
Distressed debt requires considerable expertise. Such debt is subject to serious legal issues, including possible bankruptcy proceedings, that require experience and expertise to successfully navigate.
Traps for the Unwary in Buying Distressed Mortgages
There are also several traps for the unwary in buying distressed mortgages. First, the buyer of a distressed mortgage may want to bring a foreclosure proceeding to take over the house. This inevitably will cost time and money. Depending on the local courts, and the willingness of the homeowner to contest the foreclosure, such proceedings can take as much as a year. During this time, there may be no income on the mortgage while taxes and insurance costs have to be paid. Legal issues, such as the inability to find the mortgage note in mortgages that have been sold into pools, may stall foreclosures. Some mortgage pools were improperly assembled and documented, making foreclosure difficult.
Further, during the foreclosure proceedings, a disgruntled homeowner may actually damage the home to spite the lender. In our market, we have reports of even homeowners of very expensive homes vandalizing homes by doing such things as painting “Screw First National Bank” on the walls and punching holes in them. At the least, the homeowner’s efforts at maintenance and repair will be minimal or nonexistent. The worst-case scenario is when the home is vacant, leaving it open to decay and vandalism. This scenario can give you nightmares.
Adding to the nightmare is the fact that in many communities, the zoning and building code game is designed to help the local established contractors keep market share. In some communities, if the property is deemed to have a need of 40% or more of repair, the property needs to be rebuilt up to current building code standards, in effect allowing you no more than a physical shell that would require almost new construction. Thus, the lender or distressed debt owner has to act as though the property consists of only a piece of land.
Some communities with impact fees may require the lender to pay an impact fee. Many older properties had not paid a fee and the local communities are looking for revenue. They may demand an impact fee be paid before allowing this “substantial rehab” to occur.
Also, many communities have six-month grandfather clauses that provide that if they can show that a non-conforming use has ceased to operate for six months, the community can deny a certificate of occupancy and demand the property be rebuilt up to current standards.
Bulk REO
We see many people chasing bulk REO properties where a bank is selling a pool of single-family homes they have foreclosed on. We believe that banks will tend to sell the worst properties they own in these pools, especially those that may have EPA problems, zoning problems, repair problems, impact fee problems or other problems. The buyer has a limited time to review these properties and may not be aware of the problems he is buying. While real estate is a business where knowledge of the local market is essential, some bulk REO pools contain properties that are spread out over dozens of states, making local market knowledge impossible and management of the property a daunting task.
Better than Distressed Debt
We believe that there is a better strategy than buying distressed real estate debt. Looking at buying the entire distressed home, not just the mortgage, can cause you to see the superiority of this strategy.
This method of buying distressed homes — advertising widely for distressed sellers, offering low prices, selling the homes you buy using lease options at full retail price, giving the buyers time to repair their credit so they can get a mortgage.
We can buy single-family homes at deep discounts that are comparable to the discounts offered by buying distressed mortgages. These large discounts are possible for a number of reasons. In this real estate market, home sellers face a huge imbalance in supply and demand. Home sellers listing their homes could wait as much as a year to sell, during which time the outlook for prices is a decline. Further, with the decline in the availability of mortgage credit, few buyers can get mortgages. Where we are, local lenders are not much interested in making new mortgage loans. Further, the seller has to compete with real estate that is being dumped on the market in foreclosures proceedings and in sales of real estate owned by the mortgage lenders.
When a distressed seller enters this market, the distressed seller needs cash and he needs it fast. Few if any buyers are out there for him. To more his home fast, he needs to sell at a very low price. This is how one can buy the entire home at prices equivalent to the prices being paid for only the debt on the home.
A smart investor who buys the entire home, the equity and the loan, has total control and all of the upside potential, whereas the poor distressed debt buyer has to hang on while the property is in the hands of the owner. The distressed homebuyer has all the equity and can improve the property easily and immediately re-sell or lease it.
Summary
In sum, in terms of return on investment, obtaining an asset that has to be foreclosed at 30% of its face value and praying that the asset is salvageable and serviceable at the end of the perfection/foreclosure cycle may not be cheap enough if the cost of bringing it back up to habitable status is 70% of the value. We believe that the more you study the matter, the more buying distressed homes offers better returns with less risk.
John Lux
http://www.articlesbase.com/finance-articles/traps-for-the-unwary-in-distressed-debt-724096.html
Posted on March 5, 2010
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Posted on March 5, 2010
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