Foreclosures are bad news for banks and delinquent homeowners, but they can offer the best real estate deals in town for the rest of us.
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Finding the Deal
The default management industry is becoming highly sophisticated from a technology and efficiency standpoint, as savvy investors seek to pluck gold out of the ashes of misfortune. If finding distressed properties interests you, keep in mind that many properties in default are not be found on the Multiple Listing Service that realtors rely on. To strike while the iron is hot, you may want to ask professional advisers about firms that specialize in connecting buyers with motivated sellers. |
Houses, condominiums, vacant lots, warehouses, office buildings and even factories can all be purchased after a foreclosure. Problem is, well-informed investors often snap up the premium deals before the general public knows about them. But you can compete if you know what you're looking for.
There are three main opportunities for finding a good deal on a foreclosure:
Opportunity 1 - Distress. These properties are the hardest to find until you know where to search. Drive around and look for vacated premises and properties that aren't being kept up - unmowed lawns, poorly maintained siding and overgrown shrubs. They are likely candidates for foreclosure.
Then, scour the public records to find the owners and get in touch with them. Often, the property has become a headache and the owner is ready to dump it. That's obviously to your advantage in negotiating a good deal.
Opportunity 2 - Public postings. During foreclosure, properties are listed in newspapers. If you find one you like, contact the lender and the owner – both must agree to any deal. You need to pay any arrears and then assume the mortgage to take ownership.
Caution: Don't move until you have the signatures of the lender and the owner.
Opportunity 3 - Repossession. At this point the banks have taken possession and are eager to get rid of the properties because they aren't making any money on them. Get lists of Real Estate Owned, also called, REO properties from banks.
The banks may have set sale prices on the properties, but they are highly negotiable. Get to know your bankers and ask them to tell you about promising properties as soon as they are available.
With a little foresight and work, you can beat the pack and wind up with a good deal on a long-term investment or second home. And once you find a property you like, check with your financial adviser and some real estate pros to be sure it's a worthwhile investment and fits in with your long-range financial strategy.
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