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Foreclosure real estate is like any other repossession in which a buyer defaults on their payments. Everyone hits hard times once in a while, but those who are unable to make their monthly mortgage payment may be forced to give up their property to the lender.
At any given time, between 4 and 5% of residential property loans turn into foreclosure homes for sale. The Mortgage Bankers Association of America prepares annual reports about the state of housing loans, and out of approximately 20 million home mortgages, one million properties are considered delinquent subsequently turning them into a foreclosure home for sale, bank foreclosure and hud foreclosure. This presents a tremendous opportunity for potential investments. That’s where our foreclosure home listings, hud foreclosure listings, and bank foreclosure listings can help! Our foreclosure property listings will help you get started on the path to buying foreclosure real estate.
There are three main types of foreclosure purchases. Any of the following methods can help you obtain a bargain on a bank foreclosure, hud foreclosure or foreclosure home sale:
Buying at Foreclosure Sale: A foreclosure sale is done through a court auction process where the highest bidder wins title of the property. You are allowed access to the property to inspect it prior to the auction. The property is delivered "as is," and is free of any liens.
Buying a Pre-foreclosure: A pre-foreclosure occurs after a homeowner has defaulted on their property, but before it has been sold at auction. You negotiate with the owner of the property before it is sold at the auction, and you take on the mortgage and any other outstanding debts on the property.
Buying From A Lender After A Foreclosure Sale - REO (Real Estate Owned) By The Lender: This procedure is done by dealing with the lender that has repossessed a foreclosed property. Lenders are banks, and are not in the real estate business. Therefore, they are often willing to sell this property at a mutually agreed upon price.
HOW TO PURCHASE AT A FORECLOSURE SALE
FIND PROPERTIES THAT WILL BE SOLD AT AUCTION:
In all foreclosure auctions, a notice must be published locally. Although your county clerk's office is a great real estate resource in identifying foreclosures, it can be very time consuming and not worth the headaches when this information is readily available here. Foreclosure Times.com offers the largest real estate database of foreclosure homes in the country, including Bank REO, Pre-Foreclosure, Government Foreclosures including the Federal Deposit Insurance Corporation (FDIC), HUD, Government Services Agency (GSA), and even the Internal Revenue Service plus bankruptcy and by owner properties.
BIDDING AT AN AUCTION:
If you think you want to purchase a foreclosure property, you must check the title, get a true value for the property if it is sold on the open market, and allow for sales costs, fix up cost etc., when deciding to bid.
If you win at auction, you do not become the owner of the property. You get a "Certificate of Purchase." This certificate entitles you to receive interest money, at the rate of the first mortgage. However, a Certificate of Purchase is subject to redemption by the owner or by junior creditors.
AFTER THE FORECLOSURE SALE
Once a Certificate of Purchase has been issued, you must then present cash or certified funds in the exact amount of your property bid. The Public Trustee will then obtain a redemption amount. If an owner wants to keep their property, they must pay the redemption amount in cash or certified funds to the Public Trustee. The present owner still owns the property until their redemption period ends. That period is normally 75 days (or six months for agricultural property), during which time they can pay off the Certificate of Purchase amount, plus interest and fees. In this case, no Public Trustee's Deed is issued.
During the owner's redemption period, any junior lienors, or creditors, with a recorded interest in the property can also file their "Notice of Intent to Redeem." The junior lienors who file these Intents have specific time periods (after the end of the owner's redemption period) in which they're allowed to redeem if the owner does not.
If no one redeems and all the redemption periods expire, the Certificate of Purchase holder (potentially you) can be issued a confirming Public Trustee's Deed. In this case, the title vests free and clear of all liens and encumbrances junior to the foreclosed lien except omitted parties, or parties that were not notified of the foreclosure but who have an interest in the property.
And the property belongs to you!
PRE-FORECLOSURE
A pre-foreclosure sale is a procedure in which a lender allows a mortgagor to avoid foreclosure by selling the property for less than the outstanding balance of the loan.
For most investors, the best time to buy is during the pre-foreclosure period. That is the time between the published notices and the actual auction sale. In order to buy during this period, you first have to make a deal with the homeowner. Then you'll be responsible for making up the back payments owed to the lender, as well as any accrued foreclosure costs (these range from $500 to $2000.)
HOW TO PURCHASE A PRE-FORECLOSURE:
CONTACT THE HOMEOWNER
Start with mailings. Indicate in your letter that you are a private investor and that you may be able to help the home owner with financial problems, and that you may be able to stop the foreclosure, save his/her credit rating and provide cash for use in paying bills and/or for relocating.
Follow up with phone calls if you can. Be courteous, never pushy. Never interview the home's owner on the phone. Merely state that in order to determine whether or not you can help, you will need to meet at the property.
If you feel comfortable with it, you can visit the property in person, but be prepared, you might find yourself confronted by an angry homeowner. Be polite and leave if you are asked to. Never, under any circumstance, snoop around, inspect or generally trespass unlawfully on somebody's property.
INSPECT PROPERTY AND LOAN DOCUMENTS
Use an inspection checklist and record your information and estimated costs of repair.
CREATE YOUR OFFER
If you are going to make an offer on the property, you must have the loan, ownership, and debt or lien information. You must also assess the condition of the property.
Determine the net equity in the property. This is the difference between the market value and the default amount plus liens and repair amounts.
Negotiate with the lien holder. You may offer to satisfy the lien for 20% of the amount.
Remember to include closing costs in your calculations for the purchase and sale if you intend to flip the property. Also include the carrying costs, the mortgage payments, taxes, and insurances, while you hold, repair, and then resell, along with a seller's commission if you use a broker.
We recommend taking advantage of or $3,000 back program when buying real estate because this will add to you profit margins and I can't think of any reason why you wouldn't want to make money with your next home purchase? Whether you're buying a home found on Foreclosuretimes.com or you've found a home through another source we can put money back in your pocket.
SETTLE THE CONTRACT
When the owner decides to sell, you will both need to sign an Equity Purchase or Real Estate Purchase and Sale Agreement. All parties recognized in the mortgage contract must sign accordingly.
Check with your attorney before signing any contract and make sure he is knowledgeable in real estate equity purchases.
CLOSING
Inform your attorney that you have a signed contract and that you need representation at closing. Have him prepare a Release of Lien, to be recorded at or just prior to closing, if you have negotiated a settlement with a lien holder.
Arrange your financing. If you assume the loan and have been in contact with the lender, make sure to stop the foreclosure process before the sale date.
Order your certified appraisals and inspections as required before closing. Order the termite and roof inspections as well. Verify from a title search that there are no other lien holders against the property.
If all goes well, you just bought real estate well below market value.
BANK FORECLOSURES
REO is an acronym that stands for Real Estate Owned. This type of property has come back into the bank's portfolio through the foreclosure process.
REO's are different from pre-foreclosures. Because pre-foreclosures haven't gone through the foreclosure process, they cannot be purchased from anyone other than the current homeowner. However, an REO has been repossessed from the home's owner and is now owned by the bank.
Purchasing directly from the bank is the most popular way to buy foreclosures. It's fairly easy, and less of a headache than other investing methods because it involves less complications and risks.
HOW TO PURCHASE AN REO
First identify the properties on Foreclosureimes.com that you are interested in purchasing.
MAKING AN OFFER
Contact the lender or the broker and meet him at the property so you can inspect it. Record any damages and deduct the repair estimates from your price. Use a good property inspection checklist. Investors must deduct all expenses associated with buying, repairing, borrowing, holding, and closing from the price they think they can get. Depending on the property and several other variables, your goal is to buy a property at least 15%-25% below market value. Start your offers accordingly.
Unrealistic offers will be rejected quickly. Learn to work with the banks. Home buyers can negotiate around the four discount factors: price, down payment, interest rate, and closing costs. The bank, being a lender, can negotiate all these items. Just stay within reasonable boundaries if you want to succeed.
CLOSING
When the bank accepts your offer, close as quickly as possible. Avoid delays and complications from competitive offers.
Most financial institutions require a 30-day closing period and if the buyer is not able to close on the date specified in the contract, the seller will normally have a clause in the contract that if the buyer requests a closing date extension, then the buyer will be required to pay a per diem penalty as a condition of an extension.
Conclusion
By now, you've discovered that there are several options when it comes to buying foreclosures-and after reading this general overview, perhaps you've discovered the choice that's right for you.
Yuri Epshteyn
Realtor®
561.503.0097
MyRealtor911@gmail.com
REAL ESTATE FORECLOSURES |
