Getting started on a foreclosure

To be quite honest I would not buy a foreclosure I would buy REO's. They have already been thru he bank process and now they are dead weight sitting on the banks books and they are anxious to get them off. You can offer pretty good since they already are bank owned you can usually get an answer in 24-48 hrs. And cash always speaks faster than paper.

See the forum topic "Sheriff's sale". You'll find some interesting information on foreclosure sales.

Rina

P.S. I like REOs best too.

That sounds good, but I have tried to do REO's in the past and all I got was the run around. It seems like all the banks now have an outside company that handles REO's and the outside company that handles them has a realtor that handles them so now the price of the property isn't cheap at all.

Maybe I'm doing it wrong. What is the best way to go about getting an REO?

What steps do you guys take exactly?

No you are absolutly right....

The banks use an outside company that handles REO's and the outside company that handles them has a realtor that lists the house as close to MARKET PRICE as possible!

This is what happens in my area. Say market is 200k the reo will list for 190k....

Ok guys let me tell you what I have learned. The banks know they will not get what is owed to the so the send it to Realtor to sell (REO) and I dont know about other areas but here where I am in Cali they Realtor will try to find th lowest possible comp to start offers coming in on. And go from there, but since this area is in down slide meaning market is dropping lower and lower everyday, then you can pick up GREAT deals. like property valued at 230K (or amount owed to bank)the Realtor list it for 149K comps read 175K....there are tones of room to work with there and lots of profit potential. So REO's are good here.

REO realtors are usually a pain to deal with, @ least with my dealings with them have been, they don't call you back, they seem not to care....SULLY.

Exactly. That is what my experience is. The realtors never call you back, show up, etc. So if that is the case, then does buying at auction make more sense? I'm just confused on where to start and what the best plan of action is. I feel like I have the resources I just need a push. Any advise?

REO Realtors. The realtor I work with lists everything, not just REOs. She LOVES to see me get a good deal on them. Even if they ARE the lowest priced properties she's got. Hey, it's better to sell a couple cheap ones than none at all.

Im 21 and i want to learn the business before i get invloved were do i start?

Have Questions?

i would still stay away from auctions, UNLESS you somehow went through and did a PROPERTY INSPECTION, with auctions to much RISK WITH TO LITTLE REWARD plus you can have a hand full of bidders going @ it with a bidding war, i'm sorry but i'm here to MAKE MONEY not lose it. MY 3 CENTS, SULLY.

How do you go about getting comps for a property you want to purchase. There's several properties that i'm interesting in investing, but how do you make comparison of the property that you want to buy and the property in the area. Do you get info from real estate agent or do i get the info from the county assessor? I'm new at this and mind wants to know, thanks in advance for any imput!

I think maybe you should start be developing or lining up your team.
Refer to the book if you are not sure of what I mean.

1. Get a Realtor
2. Get a mortgage broker
3. Get a handy man or carpenter for repairs
4. Get an attorney (real estate preferably)

Re-read that chapter in the book BARM pg 72. They make make your endeavor much easier and the Realtor can give you comps just by picking up the phone and asking for them.

I don't believe that anyone listed up above, but have you tried banks. Talk to your local bank and see if they have any foreclosures or REO's that they want to get off the books. They may want to work with you and may not, who knows unless you ask. I know the lady at the bank that I talk to will give me the keys and let me look at the property before it goes to auction. If the realtor that you are talking to is not wanting to work very hard to get you as a client in the REO's find a different realtor. I talked to a handfull of realtors before I found the ones that I use. If they aren't willing to put the work into finding you the properties, or finding out the information you may want, then you have to ask yourself "are they part of my team?" Keep those few little words in the back of your mind when working with them. Now, another thing with the realtors that don't want to call you back is that they may have list of investors that they work with already who they answer to first. They may go through them first to get rid of them and you may be the last person that they call if the others don't want the property, or they may think you are not serious. Good luck everyone and keep up the great work!

PS I know someone said to stay away from auctions, but you never know who will meet at these auctions. There may be other investors there that would want to work with you, or be willing to give you guidance in purchasing property in your area. It never hurts to associate yourself with the other guys in town.

First off, let me just say, all of you guys are fricking awesome! Thank you all so much for your advise. You all are too kind.

Second, is it better to try and buy the property off the buyer before the properties go to auction? Maybe it would be easier for you guys to give me advise if I spelled out my exact situation, so here it is...

I have about $100,000 cash to use on some property. This cash will be given to me by an investor if I find a good deal, but I am going to pay him back with interest after I have done the deal. I have a builder/remodeler that works for me, I have a few realtors I can work with, I DO NOT have a mortgage broker but I have excellent credit (750) and should have no problem getting a loan if needed.

I have public records for the two counties closest to me and have sifted through them and found a few sweet deals. Example: property with $49,000 left on loan worth $250,000. Property with $30,000 left on loan worth $200,000.

My plan was to look at these properties, have my realtor talk to the owners and offer them a price. If I get a good price (hopefully right around the amount they still owe on the loan if that is even possible. Is it possible?) I will refi, pull as much equity out as I can, pay back my investor plus interest, use the rest to buy other properties or fix up current property or both, and rent out the property until market turns around and then I will sell.

Does this plan of mine sound legit or does it have holes? Any advise would be great.

The problem I have with REO's is that they aren't really as cheap as I would like them to be. 85% of the market price really doesn't give me enough money to make the deal worth it. Plus, I feel like the $100,000 really wouldn't mean much to me and I would like to utilize that as best I can.

I know I just wrote a book here, but I really do appreciate all of your help.

s there some reason you cannot talk to the owners yourself and negotiate the deal. Later after deal worked out have Realtor work up paperwork or just take it straight to title company and leave Realtor out? Cutting all of that commission you would have to pay them? Just wondering

But then on the question above it sounds great if you can make it work.

A lot of times the property won't make it to the foreclosure sale. And even if it does and is "purchased", you still have to wait for the confirmation hearing. In the meantime the owner may STILL have a redemption period. I was told by our sheriff's department that, of the hundreds of sales that are scheduled in a year, there are only around 9 that actually carry through with a buyer and a confirmation.
So, I certainly plan to get more properties through this route.
The other thing I like about it is that if it does go through for such a small amount of money as what you are showing, I would feel much better getting it through the sheriff than offering the owner such a piddly amount.

I'll preface this by saying that I've never been to a foreclosure auction a.k.a. sheriff's sale. I've heard all of the negatives I need to hear to stay away from them. Rina's story that she recently posted sealed that belief. I also believe that REO's are a better bet.

However, I am concentrating right now on short sales (pre-foreclosures). I think this is the best strategy for right now as you're creating win-win-win situations. You can help the homeowner keep the foreclosure off of their credit. Also, you can keep the bank from having to go through the legal foreclosure process and fees - and they want that right now with the stacks of files on their LMD desks (believe me the bank is the least of my three concerns, but hey why not help them too if you can ). Lastly, you can get the property at a great discount.

Another great benefit to this process is that if you want to you can build a network of potential tenant/buyers (for lease options) that you have already helped and already have good credibility with. Then as you do more short sales you can turn around and put someone from your database, into one of the new homes you bought, on a 12-36 month lease option (your preference). This provides a little risk investment up front, positive passive income during the lease term, and a profit upon sale at the end of the lease term (hopfully when the market has turned back up a bit). People helped: homeowner, bank, and yourself the investor.

Well said.

Thanks Rina! Always nice to hear.

Anyone else doing short sales?

Great! So it sounds like I'm doing the right thing then besides maybe just leaving out the realtor and doing it myself. Is it often that you can buy the property from the buyer for the price they still owe on their loan or do you usually end up paying more? What are the objections you normally get from buyers for not wanting to sell to you?

Thanks again!

Mitchell

If you can get to the point where you know how to put together a "more than they ask for" short sale package you should find that you can get it for substantially less than what they owe. The definition of a short sale is that it is selling for short of what is owed on it. I wouldn't ever pay more than what they owe on it.

I haven't worked with a selling realtor yet, but I am starting a couple that I will be. I think it is easier to work w/o them, but do what you have to. I have heard that you can ask them to cancel their contract w/ the seller for a 1-2% fee due at closing. This is better than nothing for them and enables you to work with the bank directly. I'm not saying that every realtor will go for that, but if you don't ask the answer's always no right?

As far as objections, I can't tell you. Everyone I've talked to so far has been very open to help. They have also all been people that I know. Once I start branching out more we'll see I guess.

...you Anita and Jdman, i appreciate all the help and support i get from everyone of you. You guys rocks. This site is so awesome and every information being shared in here are so helpful and enlightening. Everyone keep up the good work. I'm getting my team together and i even have a private lenders in placed. Thanks again for the info and go out there and make your money...

lloydsap

correct in this situation, you see in STEVENS CASE a SHORT SALE has NOTHING to do with the DEAL, steven already said that the property was worth $200,000 and theirs $30,000 left on loan that leaves and correct me if i am wrong approx $170,000 in equity so again why would steven need to put together a SHORT SALE PACKAGE?

you would only enter into a SHORT SALE senario if the homeowner is upside down in is mortgage (meaning theirs no equity or negative equity) @ that point IF and only IF the homeowner meets certain criteria for the lender to consider a SHORT SALE, YOUR HERO,SULLY.

offer the homeowners that you had mensioned earlier in your previous posts to purchase their equity for NO MORE than .50 on the dollar, idealy between .30-.40 cents on the dollar would be even better. YOUR HERO,SULLY.

I would really think about what sully said. Start offer at 35 cent and go from theree but not more than 50 as he said. Good luck

I hadn't seen his posting about the exact scenario when I made my posting. I was commenting on short sales in genaral as compared to auctions or REO's. So, I agree that in the particular scenario that he's talking about a short sale would not apply. Sorry for any confusion that may have caused.

Now, about short sales. One of them that I am working on right now is a property worth app $195k. The homeowner owed about $160k prior to the auction. The bank bought it at the auction for ~ $120k (I think with the intent to cut most of their losses then). However, they have not been able to sell it since the auction and have already entertained a short sale offer from another buyer about three months ago. In fact the bank pretty much said that they would take $110k for it, but the homeowner didn't want to sell it to that person because it was another investor that made them feel stupid for getting into the situation they are in. Now the redemption period is approaching and we're going to offer even lower than the original post-auction offer. There should be somewhere around $90-100k in equity in the place by the time we would walk away with it, they are by no means upside in the property, but it is still being handled as a short sale. Does that make sense?

Does it cost anything to get a Realtor, Mortage broker, handy man and an attorney?

No.. the realtor gets paid when you buy/sell a house.

THe mortgage broker gets paid when you close a loan.

The handyman and attorney get paid when you use their services.

I have come up with a little system/theory as far as foreclosures go. Granted, I haven't tried it out yet, but I've attended several auctions and am constantly scanning the "legals" section of my local paper to familiarize myself. I have spent the last four years as a part-time investor with multi-family but want to move into foreclosures because of the times we're in. Anyway, this is my "system". I have noticed at the auctions I've attended, that most often the bank will "win" because they want the full amount owed them and nobody wants to pay that price. Through my research, I have noticed some things. First of all, the amount basically the bank wants, short of any costs, is the original principle sum less any payments in the past that may have lowered that original amount. Now I believe one should look for properties that the mortgage is at least five years old. Why? To allow for a decent amount of appreciation. If the borrower bought a home for $100,000 and paid 10% down the original principle mortgage amount was $90,000. Now if that house was bought in 2003 for the $100K price, then after five years of modest appreciation at 5% then today that house would be worth nearly $130,000. Verify through property records that there are no other liens on the house but the first mortgage and a buyer could theoritically pay full price to the bank at auction, $90,000 and have a home worth $40,000 more. Not to mention if you were able to buy for less then obviously your profit is much more.

Does this "theory" seem practical to those of you with more experience in this segment?