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You’ve heard it a million times. If you were to get a property that is entering foreclosure, you can get a great deal on the price of the home or property. The main question is how do you acquire the necessary knowledge to get this property. There are a lot of loopholes when it comes to foreclosures, so it’s best to know as many of them as possible to prepare yourself for what can be a great and rewarding investment.
When deciding to invest in real estate foreclosure, it’s important to know where to find these properties and how to acquire the right information. You have to decide if you will invest in commercial properties or residential. Either way, you then need to gather information on any liens or other defaults that may be associated with the property. Depending on how you buy these properties, you may end up being responsible for the liens on the property.
Though not known by many, properties that are foreclosed upon are public knowledge. The list of foreclosed properties is available through your local county building. This will only include properties that are already foreclosed. You can usually access this list around the time they hold the auction for the current month. This will give you time to do the research necessary to be prepared for the next month’s auction.
If you want to purchase a property before it goes to public auction, that will take a little footwork on your part. There are websites that offer information on properties that are in pre-foreclosure. Be aware, the information on these sites is not always accurate. We had a property bought, remodeled, and getting ready to close; yet on the website we used to find it, it was still listed as in pre-foreclosure. It’s a good idea to call the lender and make sure that the property is in fact still in pre-foreclosure. If it is you will want to contact the property owner, explain who you are and your interest in their property. This may not start out as a pleasant conversation since the owner does not want to sell the property, yet when you explain to them that this will work in both of your interests, they may change their mind. In buying the property this way, the owner will not have to complete the foreclosure process which means that their credit score will not get a negative rating. They will pay off their mortgage and you will get the property at a dramatic discount.
Whether it’s pre-foreclosure or in foreclosure, it’s best to be informed about the property that you will attempt to purchase. You can do this by ordering a title search in which a company will research the records dating back a certain time period. This will bring up any liens or back taxes owed on the property. You may end up being responsible for these extra expenses. Therefore you must be aware of them so that you can bid fairly to cover all of the expenses, not just the mortgage owed. If you do not have the money to do a title search and are willing to spend a little time at your local county building, you can do a search for these records yourself. You will need to visit the tax assessor’s office in order to determine if their taxes are paid in full or delinquent. You will also need to visit the recorder’s office and the county clerk’s office. In these two offices, you will research liens on the properties in which money is owed. This type of information is the same that a title search will turn up and you will be able to do it for free.
Once you’ve acquired the information needed, it’s time to prepare yourself to bid a price for the property. If you are dealing directly with the homeowner, you have flexibility. You should have a good idea of what they owe to the bank and any liens at this point. You may want to offer them just enough to cover what they owe or slightly more. If negotiations are successful and you come to an agreement, you must be able to close the sale before the time of the auction. This is the only drawback to this type of sale. The monies owed must be paid before time of auction, otherwise the property is sold at auction, regardless of any agreement you may have entered with the homeowner. If you decide to purchase at auction, you must be prepared to pay the full amount of the agreed on price within a certain time period of being awarded the property.
After the auction or the agreed upon negotiation of the property, you will immediately be able to claim ownership of said property. If you have been negotiating and talking to the people that own said property, they are already expecting this and will probably have already moved out. Be aware, however, that if the owners refuse to leave the property, you may have to go through the eviction process that can take up to three months to complete. An investor recently decided to walk away from the award of a property at auction exactly for that reason. His county will not send police to enforce the sale of the property. Therefore, in order to get the people to move out, the eviction process must be used. This wastes valuable time in which you could be fixing up the property and getting it ready for sale. This is one reason why, though it may be difficult, having communication with the property owners before the auction may save you a lot of headaches in the long run.
Once the property is legally yours, you are free to invest in it and profit from it. It can be a wonderful way to work for yourself and make money while doing it. It can also be a great way to generate funds to when you have very little to start with. Many businesses have successfully invested in properties this way and so can you.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter, and podcast for seniors and retirees, that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 11 years as missionaries serving orphaned, abandoned and at-risk children.
