Foreclosure Investing for Beginners


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Make huge profits with a foreclosure system even most realtors don't know about -

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Foreclosure Investing for Beginners

  1. 1. ==== ====For more information on making money with foreclosures, visit ====Profit from foreclosures is more than buying a property at a foreclosure auction for pennies andthen reselling that property for a windfall gain the next day. There are other possibilities. In thisarticle, we will consider three ways you can profit from foreclosures.Bid at the foreclosure saleBuy an REO from the lenderNegotiate a sale with the distressed property ownersBefore we dig in, though, lets consider foreclosure.The Foreclosure ProcessForeclosure is the result of default. When borrowers fail to make their scheduled mortgagepayments, for example, or when owners fail to pay their property taxes or some related obligationsuch as homeowners association fees or special assessments, transfer a mortgaged propertywithout lender approval, or undertake renovations that diminish the value of the property, becausea contract is shirked, foreclosure can occur.A legal "notice of default" or a "lawsuit to foreclose" (depending on the state) is typically filed toinitiate a foreclosure. This formally announces to the property owners, other parties who may havelegal claims against the owners or their property, and the public in general that legal action ismoving forward to force a sale of the property. This notice is delivered to the borrower at least onemonth before a foreclosure sale (typically between 60 to 180 days) and subsequently posted onthe Internet or in newspapers as public notice.In response, the borrower can do several things to prevent or delay the foreclosure.Workout the loan with the lender and perhaps reinstate or even refinance their mortgage defaults File a legal defense against the lender and in turn drag the process into court and delay it for ayear or longer File for bankruptcy and automatically stay the foreclosure action. In some situations, a bankruptcycourt can even annul a foreclosure sale that has already occurred.Okay, but with no loan workout, and when legal defenses or delaying tactics are ignored or runout, the foreclosure sale date arrives and the property is auctioned to the highest cash bidder.
  2. 2. Thus bringing us to the first way you might profit from foreclosures.The Foreclosure SaleThough foreclosure sales typically lose money for lenders, lien holders, and property ownersbecause foreclosed property sells at a price lower than market value, foreclosure auctions are notthat easy because they are not a typical market value transaction.No information about the property is given other than its legal description. You must pay cash.There is no "contingency" allowance for financing. The property is sold "as is" with no guaranteesor assurances about the title, condition, environmental hazards, or even that the property will beconveyed free of occupants (you may inherit the owner, tenants, or squatters).Its true that savvy bidders can turn big profits at foreclosure sales, but there is a caveat. Never bidblind at a foreclosure sale--you have to do your homework.REOsLenders that win the bid at a foreclosure auction classify and sell the property as an REO ("realestate owned"). Thus bringing us to the second way you can profit from foreclosures--purchase anREO direct from a mortgage lender.Since lenders often want to remove REOs from their books as quickly as possible, they may grantbuyers favorable terms such as low or no closing costs, below-market interest rates, and low downpayments. Moreover, when the property needs fix-up work, lenders are prone to accept offers at adiscount price. Lenders dont give REOs away, but you can get good deals.You can find REOs by attending and following up after foreclosure sales, or by contacting a realestate agent who markets REO listings.Distressed OwnersLastly, you can profit from foreclosures by buying property from distressed owners.Divorce, job loss, accident, illness, business failure, and other setbacks do cause people to missmortgage payments and get into foreclosure. You may be able to help them salvage their creditrecord and some equity, while at the same time secure a bargain for yourself.But the "get rich in foreclosures" gurus greatly exaggerate the possibilities of profiting fromproperty owners who face foreclosure. The reality is that when you talk with property owners inforeclosure, youre far more likely to uncover a minefield of problems requiring skill and creativitythen a simple deal.Owners in foreclosure, for example, often owe more than their properties are worth, meaning youmust talk the lender into a "short sale". The lender must voluntarily reduce the balance due on itsloan so that you receive a fair profit for agreeing to make up past-due payments and take over theloan. This is not easy.
  3. 3. Furthermore, many who face foreclosure contend with the claims of multiple creditors. You mustbe sure that none of those creditors has filed a lis pendens, or the IRS a tax lien. If so, you willhave to clean it up to gain clear title.Moreover, before you finalize a pre-foreclosure purchase with a property owner, thoroughlyinspect the property and accurately estimate the costs of repairs and renovations. You surelycannot profit from foreclosures whenever you gloss over inspections and make only an eyeballguesstimate of expected costs.Finally, bear in mind that someone facing foreclosure will not be an easy person to deal with. Sodont act like a foreclosure shark. Rather than a "Heres my offer-take it or leave it" approach,develop a sensitive, empathetic, problem-solving approach. Youre more likely to come up with awin-win agreement.Heres to your success.About the AuthorJames Kobzeff is the developer of ProAPOD - leading real estate investment software solutionssince 2000. Start working with rental property today. Discover how to create cash flow, rate ofreturn, and profitability analysis presentations in minutes! Go to => www.proapod.comArticle Source: ====For more information on making money with foreclosures, visit ====