Many investors today don’t think of real estate foreclosures as an chance for a profitable investment. This is typically because they don’t have the time or expertise to find the proper properties at economical prices and they don’t understand the ropes to buy the properties. They may also be loath to do the work necessary of going through all of the investing advertisements, foreclosure auctions or sales through lenders.
RealtyTrac (TM) (www.realtytrac.com), is a leading online marketplace for foreclosure properties. RealtyTrac publishes the largest and most comprehensive national database of pre-foreclosure and foreclosure properties. They are a avid resource to locate find foreclosed properties and they prepare monthly reports that show properties that are entering the foreclosure markets . There are also a number of websites that list bank foreclosed real estate. Just go to “Google” for foreclosures and you will see many sites that show foreclosed properties for sale. Bing Real Estate, Yahoo! Real Estate, AOL Real Estate and Knight Ridder Online are other sources for real estate foreclosure information.
Over two thirds of homeowners will avert foreclosure and many will be rescued by pre-foreclosure real estate investors who understand the foreclosure process and foreclosure investing secrets and strategies.
Foreclosures have increased tremendously nationwide and the foreclosure rate continues to climb. This foreclosure picture is the same in virtually every area of the country. The economy is in recession, and the unemployment rate is nearly in double digits, at 9.7%. People are losing jobs and they can’t maintain their mortgage payments. There are thousands of homeowners that are in various stages of losing their homes.
There are three opportunities to buy a foreclosure real estate property:
o Pre-foreclosure – from the homeowner
o Foreclosure auction – on the courthouse steps
o Buying from the lender after the foreclosure sale – listed on many foreclosure web sites.
o Another foreclosure investment opportunity is working the homeowner’s lender to reinstate the homeowner’s loan. .There are many real estate brokers who specialize in foreclosure properties and have developed relationships with foreclosure real estate investors , and when a home is in Pre-foreclosure, the broker contacts these investors and if the loan can be reinstated they will work with the bank or lender to bring the loan payments current. They in turn can obtain a good rate of return on the second mortgage that is on the property, or can actually take posession to the property for the amount of their initial investment . .
A foreclosure notice from the lender to the homeowner does not necessarily mean that the borrower will necessarily lose their home . They can refinance their mortgages and take some of the equity from the loan proceeds to bring their loan payments current. This is due to the real estate appreciation has allowed many homeowners to utilize their increased value. There are also new federal regulations that require banks to be lenient with borrowers , and allow them an opportunity to make up their delinquent payments. Many lenders will enter into a “forbearance agreement” with the borrower where the bank will “forbear” receiving payments for a some time or will accept lower payments. The deficiency is typically added to the end of the loan period .
The sub-prime loans that were offered by many lenders didn’t have the typical requirements for potential borrowers to qualify for their loans, and thus a lot of borrowers borrowed much more than they could afford, and may have taken out mortgages which adjusted their interest rates upward and increased their payments such that they no longer could afford the higher payments.
A record number of people were initially lured by these low teaser rates and took out the adjustable-rate sub-prime mortgages that put them in a vulnerable position as the initial adjustment period ended .
All of these events have created a perfect opportunity for the informed real estate investor to assist the unfortunate borrower and at the same time receive a good return on their investment.
The real estate entrepeneur can help the homeowner save their credit, stave off a foreclosure on their credit record and make a good yield at the same time through pre-foreclosure investing. This is the type of real estate investing where the greatest return on the investment can be made because you are the first person in and are dealing primarily with the homeowner. If you have to bargain with a home that has been already foreclosed, then there are other people involved, such as real estate brokers , appraisers, and the lender , all of whom want a return on the sale of the property .
To locate pre-foreclosure properties go to the legal newspaper for your county where the foreclosures are listed . The foreclosure sale is typically advertised for four weeks. During this time you can speak with the homeowner, or bank to determine if the property will actually be foreclosed. You may be able to purchase the home for the loan balance plus the lenders costs which may be well below the market value for the property . The downside to this strategy is that you may not be able to get inside the home to see the condition of the property . You should discount the market value significantly if this is the situation. Most real estate foreclosure investors won’t pay more than 70% of the current fair market value of the property, in order to cover contingencies to fix up the property.
If the property has been foreclosed you can then contact the bank . They have traditionally already “written down” the value of the property to its current market value and may be amenable to take a further discount to sell the property quickly so that they can re-lend the money.