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Foreclosure Bargains
Unfortunately for home buyers, once a lender forecloses on a residence, the lender's asking price is often marked up to full market value and the home is no bargain for the buyer. The key to buying foreclosure bargains is to buy at the right time in the foreclosure process.
If you want to buy a home at a wholesale discount price, it will take some W-O-R-K. It's a dirty word, but there is no other way to explain buying homes at below-market prices.
In addition to houses being foreclosed by mortgage lenders for nonpayment, other types of wholesale distress bargains are probate sales, IRS tax seizure sales, property tax sales, abandoned properties, condemned properties, and distressed, run-down properties.
Some people make a full-time living tracking these distress properties because of the tremendous profits available. These bargains become available in all price ranges, from the very best to the very worst neighborhoods.
Here is the foreclosure bargain-finding procedure:
Start with a reliable local information source, such as a legal newspaper or privately-published daily or weekly newsletter. To find these sources, ask local real estate attorneys, realty brokers and title insurance officers. The county recorder of deeds is another good source.
Most large cities have one or more publications of foreclosure and distress property notices. But in smaller communities you may have to go to the county recorder's office to do your own research. Incidentally, most of these distress properties are not listed for sale so don't expect much help from real estate agents.
Develop a tracking system to keep records of the bargain properties you discover. It often takes many months from the recording of the notice of default or mortgage lawsuit until a property owner decides to sell just before losing the property by foreclosure or other legal process.
Talk with the distress property owner to learn about the residence to see if (a) you are interested in acquiring it and (b) if the owner will be cooperative. Unfortunately, many distress property owners bury their heads in the sand and do nothing until they lose their properties.
Since foreclosures comprise the majority of wholesale real estate buying opportunities, it pays to understand how foreclosures work. Exact procedures vary by state and locality, so don't hesitate to buy an hour of a local real estate attorney's time to ask your detailed questions.
Most distress properties become available due to divorce, unemployment, death and illness. Since you didn't cause the owner's problem, don't feel bad about acquiring the home or other property at a wholesale price. Someone will benefit. It might as well be you.
Here are the major foreclosure acquisition opportunities:
Before the foreclosure sale
The first wholesale buying opportunity occurs before the foreclosure auction. Many homeowners who are unable to maintain their mortgage payments will sell before the lender's foreclosure sale.
The key question to ask is, "How much do you want for your equity?" It is often possible to buy a residence for $1,000 to $20,000 cash to give the owner some "walking money."
However, before paying the seller any money be sure to have the title checked to be certain you know what existing encumbrances you will be assuming. Often you will discover the owner has mortgaged the house to the hilt and has zero equity.
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