Simple Tips For Buying Foreclosures

Posted on Monday, February 21, 2011

Here are some bulltes points from a segment I recently did for WPTV in West Palm Beach , Florida:

Opportunity in all prices ranges, property types and areas.
Three Foreclosure Strategies
• Distressed or Default- buy from owner.
• Foreclosure Sale – buy on ‘courthouse steps’
• REO-buy from bank after they own it
Four Factors Determine Your Strategy
• Tolerance for Risk of added costs
• Patience and Time for Hassle
• Flexibility (can you wait to buy or buy quickly as needed? Can you pay cash?)
• Desired profit (more risk, hassle, flexibility means more profit and visa versa/to buying earlier in stages) Discounts range from as little as 5% to as much as 30 or 40%.
• May depend on what you’re buying for; personal use, rental, flip
Main Differences Verses Buying From Regular Seller
• Cooperation. Listing agent, asset manager, decision makers at bank don’t have same incentives. Dealing with a lot of deals, not just one. Primary concern is CYA & paycheck
• History. No one can provide.
• Inspections and Repairs. May be poor condition. Limited access (sometimes none depending on stage). Bank’s don’t like to pay.
• Contract and Negotiation. Bank form. Little leverage.
• Financing. Typically needs to be lined up (sometimes no contingency depending on stage)
• Title. Need to be extra careful foreclosure was done properly and no other liens. Robo signers
• Possession. May need to evict owner or tenant.
• Choose the Right Professional
Knows neighborhood (look for name on signs and MLS)
REO experienced (ditto)
Rule of 3: Speak with three and check 3 references
Critical in helping you find and negotiate the deals and avoid pitfalls

• Do Your Own Homework Too
Neighborhood. Sold, listed, pending, number of foreclosures (if alot, prices may go down more).
To Find Properties. Signs, ads, look for big REO listing agents – REOS take a few weeks to get into MLS, ask agent what’s coming up, websites, auctions, government, banks, asset management companies, foreclosure companies.

Once Your Find Property. History. Public records (mortgage balance, prior price/value). MLS (how long listed, price reductions, other offers, list to sold differences for same agent or bank will tell you how much they’re expecting). Talk to neighbors.
Use this information to make decisions and negotiate.

• Prepare in Advance for Opportunity
Inspectors (biggies to eliminate are mold, asbestos, radon, lead, termites)
Lawyer and closing company
Appraisal (how to handle if low)
Get to know the contracts and disclosures. Get familiar with loan documents
This will give you the opportunity to give in on points important to the bank that don’t cost you.

• Plan for the Best But Prepare for the Worst.
If your strategy is to take more risk, always have a plan “b”
Most Important, be persistent. If offer is rejected. Wait 30 days and submit again. Unfortunately there are plenty of foreclosures to go around. If you put in the time and elbow grease it will definitely pay off!
Happy house hunting!

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