How to Buy Foreclosure Properties
You can buy foreclosure properties for as cheap as 30% or 40% below market, but most foreclosures sell for only 5% below market. So what is the trick to make from money from mortgagee sales. Firstly you should be able to identify the right property and correctly assess its market value. Secondly you must negotiate with the lender who may be willing to waive some closing costs, offer a break on the interest rate or reduce the down payment.
You will need to invest your time and effort which can result into huge savings. Good foreclosure properties are available, but they require preparation, research, persistence and patience.
Next step is to locate properties scheduled for foreclosure sales. This can be done by checking classified newspaper ads for listings under Foreclosure Notices, Auction Sales or Sheriff’s Sales.
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Once you have located the property look for liens on the property. Liens are placed on a house for unpaid property taxes. You must assess the market value of the property by comparing sale prices of similar properties sold in the neighborhood.
You will need to research local state foreclosure laws as they can differ for each state. Some states require judicial foreclosure which means the lender has to sue the borrower and get a court order before the property can be put on the market. In other state lawsuit need not be filed.
If you are new to foreclosures then buying from a bank is the safest way to go. There is comparatively less risk involved with probably no liens, no taxes or tenants to evict. You may also find the bank willing to finance the property with much lower interest rate and lesser down payment.
Assessing the condition of the property is very important. One frequent problem you will face is getting access to the property. You will get resistance from the hapless, soon-to-be-dispossessed, irate home owner who will prevent access to the property during the sale process in an attempt to frustrate the sale.
Some enterprising home owners use vicious guard dogs to keep potential buyers away. This can be a blessing in disguise for you as it will dissuade many cautious would be buyers from bidding at the auction.
A stout ladder, strong pair of binoculars, a camera with a good zoom lens in a willing next door neighbors garden can probably get you all the necessary information you need to beat the opposition. You can also do some online research for an earlier listing of the property that may give you photos of the property or even a full virtual tour!
Foreclosure properties bought in good areas at below market values can be a sound investment strategy for many investors as these properties will appreciate in value annually.
A word of caution: You may face problems in physically evicting the ex-owners out of the property even if you are a successful bidder at the auction. This can result in extra costs to evict and also loss of rent during the period. You will need to factor this down into your calculations as being just another hazard in the business.
Foreclosure properties can be a big bonanza for bargain hunters. Ironically, foreclosure sales have become so popular that prices are frequently not bargains at all. I have seen investors (who have not done their home work) paying more than the market value of the property at foreclosure auctions.
For those of you who think that foreclosure properties are the quick path to riches, best you take a big breath before rushing in. You may be able to pick up better deals on the open market — with far less hassle.
