350 Camino Gardens Blvd., Suite 102, Boca Raton, FL 33432. Phone: 800.535.6945 1

HowtobuyaForeclosurehome?Knowthebasicsbeforeyoubuy

Foreclosure ismostoftenaregrettabletragedyforahomeowner.Thecircumstancesthatgiverisetoforeclosure,wherebyalenderisforcedtostepinandperfecthisinterestinthesecuredproperty,oftenfollowacatastrophicfinancialsetbackforafamily.Banksalsodislikehavingtoforeclose,own,andmarketrealestate,asitrepresentsafinanciallosstotheinstitutionaswell.These circumstances place the real estate investor who knows how to flip properties in anadvantageousposition.Thenotionofsteppingintoaforeclosuresituationisnotasdamagingtothehomeownerasonemight expect. The decision by a homeowner to allow a foreclosure nearly always follows areasonedassessmentthatconcludesthereisnotenoughequityinthepropertytocontinuewiththeburdenofpayments.Afterall,iftheequitywerethere,thehomeownercouldsimplyselltheproperty and withdraw the equity himself. In most instances, it is the lender who takes thegreatestloss.Whenbankstakeoverpropertytheyarehighlymotivatedtoget itofftheirbooks.Theygobythe theory that the first loss is the best loss. This leaves open the prospect for greatopportunitiesfortherealestateinvestorwhoknowshowtobuyproperty,rehabproperty,andflippropertyforaprofit.Havingsaidthat,beawarethattherecanbehiddenproblemswithforeclosedpropertiessuchasdeferredmaintenance items, thepresenceofmold, broken appliances andplumbing fixtures,andanexpensivecleanoutwhen thepreviousowner trashes thepropertybeforevacating it.Thoroughpropertyinspectionsareamustinorderthattherealestateinvestorhasacompleteunderstandingofthescopeofproblemshemightbefacing.

350 Camino Gardens Blvd., Suite 102, Boca Raton, FL 33432. Phone: 800.535.6945 2

BuyingatAuctionFindingpropertiesthatareinforeclosurecanbeanexhausting,butrewarding,task.Youcanfindtheminyourcountyrecords,inthepublicnoticesinlocalnewspapers,orbycontactinglendersthatare sellingproperty.Anotheruseful tool is theofficialwebsiteof theU.S.DepartmentofHousingandUrbanDevelopmentwhereinformationaboutforeclosureauctionscanbefound.AssessthePropertyInsomeinstances,ahindrancetomakingasolidassessmentofvaluecanbetheinabilitytodoathorough inspection of the interior of the property. If the owner of the property is still inpossession,andhechoosestonotallowyoutoviewhishome,thenyou’reoutofluck.Youmaybeableto judgewhatwork isneededontheoutsideoftheproperty,butare left intheblindabouttheinterior.Ifthatisthecase,thentherealinvestormustplanfortheworstandbidonthepropertyaccordingly.SetYourBidinAdvanceThesuccessfulrealestateinvestorknowswhatpricehecanexpecttogetforthehousewhenheisreadytoputitonthemarket.Hehascheckedcomparablesalesintheareaasameasureofwhathemightexpectwhenit’shisturntosell.Knowingthepriceforwhichhecanexpecttosellthehouse,andhavinganeducatedestimateofthecosttoupgradethehouseandmarketit,theinvestornowknowswhathecanafford topay for it.With thisbidprice inmind,hemustbedisciplined.Thisisbusiness.Thisisnotimetobeemotional,ortofallinlovewithaproperty.He

350 Camino Gardens Blvd., Suite 102, Boca Raton, FL 33432. Phone: 800.535.6945 3

mustsethisbidpriceandsticktoit.Ifthebidsexceedhisestimations,hewilljusthavetowalkaway.Therewillbeplentyofotheropportunitiestobuyandsellpropertiesprofitably.BuyinganREOPropertyAnREO(RealEstateOwned)propertyisonethatdidnotsuccessfullysellatauctiontosomeoneother than the lender. Thismeans that nooneoutbid the lenderwhen thepropertywent topublicauction,andthe lenderhadto takepossession. The longerapropertyremainsunsold,themorea lender loseson it.Theexpenseofmaintainingthepropertycontinueon,andsuchthings as real estate taxes, homeowner’s insurance, maintenance, and utilities continue andbecometheresponsibilityofthelenderinpossession.Thisiswhenthebanksbegintosweat.Tobeginwith,bybankaccountingrules,realestaterepresentsaliabilityonthebooks.Andinthiscase,aliabilitythatjustkeepsgrowing.Thisisgreatnewsfortherealestateinvestor.Againthefirst loss is the best loss rule takes over, and often the bankwill discount the property quitedeeply justtoberidof it.That isagoodreasontoknowthepeople insidethebankswhoareresponsibleforcollections,foreclosures,andownedrealestate.Onecautionthough:banksdonotalwaysknowtheconditionoftheirproperties,soitisimportantfortherealestateinvestorwho is interested in a property to do his own thorough inspection. This will help to avoidunpleasantsurprises,andhelpassureabetterbottomline.AreBuyingForeclosuresaThingofthePast?Therearestillthousandsofpeopleengagedintheforeclosurerealestatebusiness.Thebuyingand selling of foreclosed properties reached its peak following the financial crisis of 2008. Itbecame such a robust enterprise that homeowners and public investors such as hedge fundsentered the market and began buying properties in bulk. This is a testament to just howprofitablethisbusinesscanbe.Butthatdoesnotmeanthattheopportunitiesforforeclosuresareover.Therearestillhomesgoingintoforeclosureandthedefaultrateisslowlyrising.Withdiligenceandpatience,andbyworkinghardandlookingintherightplaces,today’shomebuyerandrealestateinvestorcanstillfindgreatbargainsthatofferthepotentialforhealthyprofits.Youcanfindforeclosuresinyourareanow,justclickheretostartsearchingorgetemailalertsasnewpropertiesareaddeddaily.