Wanted: Houses

With interest rates at record lows and the stock market looking too perilous for small investors, many people are putting money in an asset they understand -- real estate.

One of the best places to invest is in foreclosures and bargain residential real estate. The current market conditions make it a perfect time for a small investor to purchase one or more foreclosure properties for their private residence, rental or resale. During economic downturns, more upscale homes go into foreclosure, so the notion that foreclosure homes are only available in crime-ridden areas is inaccurate. Beachfront and homes in affluent areas are part of the mix of foreclosed properties available.

But anyone considering buying a foreclosed home should forget about paying pennies on the dollar. "You can buy foreclosures for as cheap as 30% or 40% below market, but most foreclosures sell for 5% below market,.  Yet the savings may be twofold if the property is purchased from the lender who holds the mortgage that's in default. That lender may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment. Investment of time A novice must learn to navigate the foreclosure process. The time and effort can translate to savings. "f somebody spends 10 hours a week for five weeks to do research, it's worth it. For most consumers, however, the foreclosure process can prove daunting. Good buys are available, but they require research, preparation, patience and persistence. The foreclosure process starts when a property owner falls behind on mortgage payments.

Many owners of homes that go into foreclosure have been struggling financially for almost a year before they give up, which usually means that the house has not received needed repairs or general maintenance for a while. This may include everything from missing light bulbs to roof leaks. Tree limbs in front yards, broken appliances and windows, and dirty carpets, floors and walls are found in even very-affluent area foreclosures. This can be a boon -- or boondoggle -- for a buyer. Houses in poor condition might fetch bargain prices, but repairs can boost the cost again.

The first rule of real estate, "location, location, location," applies in these situations. If there is trash in every room of the house, but the foreclosure is in a good area with high property resale values, hold your nose, walk through the entire house and consider making a low offer.

Reading assignments

• When a lender decides to foreclose on a property, a notice of default or a lis pendens (Latin for "lawsuit pending") is filed, depending on the state. This document is a public record, and for buyers, it's the first step in locating a property in foreclosure. A buyer looking for foreclosures also can buy magazines and newsletters that list properties in default.
• Once a home has been located, search public records. Look for liens on the property, since they can drive up the purchase price. Liens typically are placed on a house for unpaid property taxes. Also check assessed values and sale prices of neighboring properties.  For novice investors, buying from the lender is the safest way to buy.
• Most foreclosures are taken back by the bank during auction.  While well-located homes in good shape generally don't sell for deep discounts, rundown properties can be sold more cheaply. Often, the banks hire a real estate agent and sell foreclosed homes in the traditional manner. But sometimes buyers can succeed by pestering bank loan officers with low offers. Buyers might try low-balling the lender's REO (for "real estate owned") officer shortly before the nonperforming assets have to be reported to supervisors.
• The safest deals Bank-owned - REO - properties offer the safest deal for inexperienced foreclosure buyers,  There's no risk. There are no taxes, no liens, no tenants to evict.  A lender that's eager to sell might be willing to offer attractive terms,  The lender might offer to finance the property at a below-market rate or with a lower-than-usual down payment. Because the bank already has done an appraisal, the buyer might not have to pay an appraisal fee.  And lender deals typically include title insurance, which removes much of the risk that accompanies buying homes earlier in the foreclosure process.

Some ideas for real estate investors: Locating Real Estate.

0. Classifieds ads
0. Call For Sale By Owners, Realtors and real estate agents. Some people think that they will snatch up the good deals for themselves. Apart from being ethically wrong and illegal in most states without full disclosure, it just doesn't happen that often. Amazingly enough, most real estate agents don't invest in real estate beyond their own home. I like houses that have been on the market for a little while and the agent has stopped marketing it actively. If the home is vacant and owned by an out of state owner, this is a big plus.
0. Foreclosures before the property is sold. (Buy from home owner). Be aware they have been hit up by every foreclosure shark in the area. They have been threatened and told how their credit is going to be ruined. Also be aware that in many cases the property is worth LESS than the now outstanding mortgage and legal fees. Is it possible to buy a house like this and still make money? Maybe, if you can get the lender to agree to take a short sale, that is satisfy the mortgage for less than the amount owing on it. Foreclosures at the court house or trustee's sale. (Full cash is needed). There can be a redemption right for the home owner to get their house back AFTER the courthouse sale. The time varies from state to state from 6 hours to many months. Check the law in your state. Foreclosures after bank or other lender owns property. Often call REO for Real Estate Owned. Sometimes the lender will offer special financing to credit worthy investors to move these properties off their books.  Lender owned properties may or may not be a great deal.
0. HUD or VA foreclosures. Both of these require you submit a bid through a qualified real estate broker. Be aware, in many cases these properties are not good deals because of the excellent financing often offered. Avoid bidding on houses that look attractive and will be bid on by people who want to live in the house. Ugly houses, with tall grass, fleas and termites are best, provided you can fix the problems and still make money!
   
0. Classifieds Ads, call on the properties to RENT ads. (Many landlords would sooner sell than be a landlord). This is also a great way to find potential sandwich lease option properties. A sandwich lease option is where you have an option to buy the house and rent it from the home owner and then give another lease option to a buyer who intends to live in it at a slightly higher price and higher monthly rent. 
   Driving along look out for abandoned, unkempt properties. You can find the owners through public records in most states.
0. Review court filings of recent eviction cases. This is a great place to find motivated sellers. Don't waste time with apartment buildings. These are usually professionals who regard the occasional eviction as inevitable as property taxes. Look for the private owner who has let several months rent build up while he listens to hard luck stories, only to find that his kindness has been repaid by the tenant trashing his property. Magic words to use, "I can solve your problem. I can take over your property and you'll never get another phone call about that house again."
0. Drive around looking for For Sale signs. Perhaps you could offer the newspaper delivery person or mail person a few bucks if they give you the address of a suitable looking house. Penny saver type ads. Attorneys. Remember that an attorney will never give you the name of his client for ethical reasons. But he could refer his or her client to call you. Or call you himself if he is involved with an estate sale, divorce or foreclosure.
0. Divorce filings. Don't get between the feuding couple, just be diplomatic and a problem solver.
0. Probate filings. 2/3 of all deaths eventually result in the sale of real estate. A sensitive touch is essential. Don't show up at the funeral and say, "Wanna sell your dad's house." Write instead to the personal representative. Explain that you are a real estate investor and would be interested in buying the real estate in the estate for full cash. TIP. Typically, the further away the relative who ends up with the house, both in relationship and physical distance, the better deal you will get.
0. People being transferred. Moving companies.
0. Bankruptcy filings. You may need to get the creditors approval.
0. Put out flyers on notice boards or even on light poles (don't blame us if the electric company gets mad at you).
0. Magnetic signs on your car. "We Buy Houses" plus your phone number.
0. Wear a T shirt. "We will buy your house today." You can print custom T shirts on your computer or order them in many malls or over the Internet.

Some Rules for Success in Real Estate Investment

Rule one: Realize that real estate is a local market, Often a really local market. So buy properties you can drive to within the hour. This makes it much easier to: know values, meet potential buyers and sellers, tenants, contractors etc. You can increase this to two hours if the deal is for over $1 million.

Rule two: As a rule of thumb, if you intend to flip a property you should pay 30% below fair market value. Let me be clear here, if you buy a house for $70,000 and it will be worth $100,000 after you have spent $30,000 in repairs, you didn't get a bargain. You paid fair market value. To more accurately analyze the deal:

Rule three: NEVER try to pyramid your holdings by borrowing more money against a property you already own. Buy a property, fix it, flip it and use that money against your next deal.

Rule four: Don't quit your day job until you are earning as much from real estate part time as you are from your day job full time.

Rule five: NEVER lie to get a loan. Don't fudge appraisals or your income. If the deal is as good as you say it is, you will be able to find a hard money lender on our web site:

Get Money For Your Deal

I am a hard money lender myself. I am constantly looking at deals where it is obvious that the comps have been carefully selected to show a higher value. Why on earth would you do this? Even if you get a loan for more than you should do, you WON'T MAKE MONEY ON THE DEAL. Because you will have PAID TOO MUCH.

Rule six: Always act with integrity. Do what you say you will do when you say you will do it.

Rule seven: Don't confuse an upwardly moving market with you being smart. If all prices in the area go up 20% that doesn't make you a real estate genius when you sell, just lucky.

Rule eight:Keep some properties as long term rentals. Say one in three or one in four. That is how you build up true wealth. Just buying, fixing and flipping is a JOB just like your day job. Not an investment. If you can buy and keep just one property a year, you will own 10 properties in 10 years. Enough to retire on.

Get rich slow by buying properties from senior citizens and then letting them live in them for as long as they want at a nominal rent.

Should You Buy a Foreclosed Property?

Thanks to cooling housing prices and the subprime mortgage meltdown, many bargain-hunters are turning their attention to foreclosures. And there are plenty to be found. Web sites like Foreclosure.com, Foreclosures.com and RealtyTrac.com, which list foreclosed properties and charge monthly subscription fees for access to their databases, all report an increase in listings. Indeed, at RealtyTrac.com the number of foreclosure listings in October 2007 was up 94% compared with a year earlier.

Buying foreclosures is mostly the turf of investors looking to purchase properties at below-market-value prices, fix them up and then sell for a profit — a practice commonly referred to as "flipping." But with home prices in some parts of the country still prohibitively expensive, many first-time home buyers are looking into foreclosures, as well. Currently, RealtyTrac.com estimates that about 20% of its subscribers are first-time home buyers, and another 10% are homeowners looking to buy a second or vacation home.

For the right buyer, foreclosures are an excellent opportunity to buy a house at a lower than market-value price," You  can shave anywhere between 10% and 20% off the market value of a house, but some will have to put in a bit of "sweat equity," as these homes can come in need of repair. Right now, you can actually buy a solid home for less than tax value.

Needless to say, buying foreclosure properties is more complicated — and entails more risk — than going the regular home-buying route. Here's what you need to know.

Tapping Pre-Foreclosures
Buying property in a pre-foreclosure stage — the period between receiving a Notice of Default from the lender and the day the lender puts the property up for an auction — may offer the best bargains, but it's also the most difficult. There's definitely an art to it. For reference and more information click here:  www.Foreclosure.com   Pre-foreclosures tend to be more for the seasoned investors.

For starters, you have to deal directly with the owner of the house, who may not even be aware that the house was made public in a foreclosure listing. "These people don't ask for their properties to be listed on our web site," says Alexis McGee, founder of Foreclosures.com. Rather, foreclosure web sites get their listings from county recorders' or clerks' offices — notices of default are public record — and add them to their databases without the owners' knowledge.

And then, even if you come to an agreement with the owner, you may have very little time to complete the transaction. Depending on which state they call home, the owners may only have a month before the bank puts it up for auction. In Georgia, for example, a foreclosure sale is scheduled within 30 days of receiving the Notice of Default. (Other states are more generous. In New York, for example, a foreclosure could take as long as 15 months. You can find foreclosure laws by state on www.RealtyTrac.com  or  www.Foreclosures.com . (Click on the blue letters)) 

Approaching the owners is never easy. "They're in a distressed situation,"  "They're a little hardened, so it's difficult to establish a rapport."

The Risks of Auctions
Auctioning the property, which usually happens on the local courthouse steps, is the next stage in foreclosures. And if buying pre-foreclosures is tough for the regular home buyer, buying at an auction can be downright impossible. For starters, you have to pay cash — financing auctioned properties isn't allowed. You're also expected to buy the house sight unseen. And on top of that, you're not allowed to get title insurance: If the house has a $100,000 tax lien attached, the new owner will have to pay it off. The auction is the most risky way to buy, I don't recommend it.

Foreclosed Deals
If no one shows up on the courthouse steps or there are no bids high enough to cover the outstanding loan, the bank will take ownership of the property and put it up for sale through a real-estate broker. This is the easiest way to buy foreclosed properties, but you are also least likely to get a discount, as the bank will typically put it up for sale at or close to market value.

However, the prices are still negotiable.  When a bank only has one or two foreclosures, they may try to get the best value.  When the banks starting to get more inventory to compound, the banks want to get rid of these properties and you see them starting to negotiate and discount.

Bank-owned properties — also known as REO, or real estate owned properties — are usually sold through real-estate brokers. To find a REO broker in your area, search the REO Network's database, which represents over 8,000 brokers, agents and vendors (such as appraisers and contractors).

Government Homes
When homes that were bought with loans guaranteed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) go into foreclosure, they're put up for sale by the government itself. The listings are free and updated daily, but only HUD-registered brokers can place bids. Each listing comes with a detailed property inspection report and outdoor pictures of the house — along with the contact information for local HUD brokers.

For the first 45 days, a listing is available only for homeowner occupancy, which means you don't have competition from seasoned foreclosure investors.  You get the first chance at all the good properties as a homeowner.

How to buy foreclosures

 Click below:

http://www.realtytrac.com/foreclosure/how-to-buy-foreclosures.html     

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CONTACT ME:

Briefly describe loan amounts, give location, condition, time constraints, tell me what you think your house is worth, and what you need.

Dallas Thompson: dallasth@earthlink.net

FAX: 661-823-0130