Buying Foreclosures, REOs. Short Sales, FSBO, MLS and More

Buying PreForeclosures “Subject To” Without Using Your Own Money
By: Justin Lee

There are many ways and methods in which you can fund a PreForeclosure property purchase: pay all cash (yours or a hard money lender’s), find a credit partner, use conventional financing (a mortgage), or my personal favorite, reinstate the loan and buy it “subject to.”

Has any done assumable mortgages? It's a type of financing arrangement in which the outstanding mortgage and its terms can be transfered from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.

Buyers are typically attracted to homes with existing assumable mortgages during times of rising interest rates. This is because they can assume the seller's mortgage, which was created when interest rates were lower, and use it to finance their purchase.

Ordinary home sellers have a hard time competing against the cut-rate bank owned properties that are currently dominating the market.
NEW YORK (CNNMoney.com) -- Selling a home in this market is hard enough. Competing in a neighborhood flooded with foreclosed homes that are heavily discounted is nearly impossible.

There are nearly a million repossessed homes on the market right now. And these homes, dubbed in the industry as REO (real estate owned) properties, are being marketed by the most motivated of all sellers - that is, the lenders stuck holding the bag when homeowners default.

The house next to the one I'm renting is going to be sold at an auction. Does that mean the home has been foreclosed? Is it possible to buy it of find a buyer for it before the auction date?

A Horrible Example

The picture in the listing sheet showed an unkempt lawn, but the front of the house looked quite normal except for a corner of the roof that appeared to have been sawed off. It had 3 bedrooms and 1 bath, with a double attached garage and a basement. The asking price was $84,900. The buildings in the immediate vicinity, mostly houses, looked only so-so, not a good sign.

College have been keeping me off of studying real estate, but I just got back and saw Dean's 1st video blog.

I did what he said and tried to find a realtor, but every single one that I contact keep giving me pretty much the same response:

"You need to go get a job before you call my office, kid. You don't even have credit, how are you going to buy real estate? Quit wasting my time."

When a homeowner has gone through a foreclosure more particularly in pre-foreclosure sale they may receive a 1099.

This is an accounting to the IRS that the home owner made an increase or profit through the year. However, because of the great substantial distress the homeowner has been under the 1099 may not adversely affect them.

The other options banks have are to give a deficiency judgment. This can be given if a short sale or foreclosure auction is followed. When you negotiate with the banks you can require that they not send a deficiency judgment.

I have heard the question: How do I get around the agent on an REO?

Banks want to get rid of their property as quickly as possible so they list the property with a real estate agent as quickly as possible. The only way to get a real estate agent out of the picture would be to get to the bank before they give the property to an agent.

There are a lot of what makes a deal good. I am writing to define some of those so you may gain a perspective to help you in your investing career.

Appreciation is one of the largest wealth building machines in investing. Many investors do not capture this. Appreciation always works from the value of the property.

Suppose you had a property worth $100,000 and it appreciated 4% per year. This would be a 4% return had you paid $100,000 in your own cash to purchase the home. But, suppose you paid $3,000 for the down payment. Your return would be over 100% just off the appreciation.

There are a lot of what makes a deal good. I am writing to define some of those so you may gain a perspective to help you in your investing career.

Equity is one of the largest factors that drive investors. Buy low, sell high. This same factor is abounding in all of real estate investing. Many will purchase a home that supposedly cash flows but has no equity. This is wrought with danger because if you could not rent the property you have no room to sell.