When pestering can pay off in foreclosures
Purchasing foreclosure properties is not for the faint hearted or the work-shy. To get a really positive result you need to be in the mood to research your subject thoroughly and get to know all of the players. This is a situation where persistence can pay off handsomely.
Where a homeowner falls behind on mortgage payments and, because of his or her financial predicament, can’t get back on track again the lender will start foreclosure proceedings against the borrower. The property does not actually become a foreclosure until the title has been transferred to the lender. At this point the lender has the security in his hands but he would much rather have the money in the bank.
As soon as foreclosure is triggered, a notice of default will be filed. This is the first indication to potential buyers that a bargain may be on the market. However such news is not posted on the internet for all to access. The information is held locally and can only be accessed by people who have made it their business to be included in the loop. Frequent visits to the County Records Office or tenaciously acquiring copies of the local legal newsletters will provide clues that can then be developed into purchasing projects.
The first task is to educate yourself about the condition of the title. It may be encumbered by liens such as unpaid property taxes. This will drive up your purchase price since whoever acquires title to the property will be liable to these liens. Research is also required into recent values for similar properties in the same neighborhood and, importantly, actual sales prices rather than asking prices.
Buying directly from the lender is probably the safest option for buyers new to foreclosures. Banks tend to take back foreclosures from the auction and sell them through real-estate agents, however pestering the bank loan officer with a low offer to avoid real-estate fees has been known to get results. Homes in good repair and in good neighborhoods will rarely be discounted by much, if at all. The real bargains are to be found in the run-down neighborhoods where the property has been left to deteriorate over a period of time. This, of course, carries the burden of repairing and remodeling but, if the math is right and there is a market for resale, it may just be the right property.
If you get to know the bank’s Asset Manager or REO Officer you’ll know that he or she will periodically report underperforming assets. A large chunk of real estate that’s not selling is an underperforming asset and, if your timing and your offer is right, you could make them look good and get your property at a reasonable price.
There may be even more deals to broker with the bank. They may be able to finance the property at a below-market rate to assist the purchase or they may accept a smaller down-payment and they might just waive the appraisal fee because it has already been done once.
Dealing directly with the lender could also pay bonuses in that they may offer title insurance which is arguably one of the biggest risks in the foreclosure process.