Why the internet has expanded the foreclosures market
Like a scene from a 1930’s black and white movie you can imagine a “bird-dog” sidling up to the sharp suited property investor at the bar. He touches the rim of his Trilby in a sign of greeting and respect. “There’s a foreclosure going down on 55th and Lexington, I thought you might be interested?” The investor takes a deep draw on his Cuban cigar, “What’s the situation?” he drawls. “The old man is ill, can’t work so they can’t meet the loan payments. They’re ready to moonlight.” The investor smiles at the “bird-dog”, “Thanks. If it goes through you’ll get the usual $100 finder’s fee, OK?”
That’s basically how foreclosures used to be discovered. People scouring the County Records and keeping an ear to the ground would sell information to their contacts in return for a nominal fee. These days the “bird dogs” are behind a computer keypad. Their information is now available to a much broader audience and surprise, surprise the best information is never free; you’ll still be expected to pay a finders fee.
Foreclosures happen in many ways. Divorce, unemployment, illness and death can cause families to default on their mortgage payments. As their financial situation becomes progressively worse, they neglect the fabric of the house and it begins to deteriorate with an inevitable effect on its market value. When the time comes for the lender to seize the property, it may not be fit to market conventionally so the houses generally go to auction.
For the past twenty years or so, the US Government has been encouraging home ownership for all and various agencies have been set up to insure preferential mortgage loans made to people on marginal incomes. When these properties are foreclosed, the agencies like the Department of Housing and Urban Development (HUD) reimburse the lender and take over the title of the properties. The properties are then auctioned off, with first option being given to owner-occupiers.
These auctions are sealed bid, electronic auctions conducted country-wide through a network of registered real-estate brokers and the property information is advertised on the world-wide web for all to see.
Although the government agencies have information that is constantly updated and is normally as current as it can be, this does not apply to all websites dealing with foreclosures. Many of the free sites do not get revenue in the way that the old “bird-dogs” did. They are merely looking to attract visitors to their sites to benefit from advertising agreements. The data on these sites is of dubious quality. As a general rule, the more you pay for your information, the better it will be.
In the foreclosure market, you need to be one step ahead of the crowd but on the internet that crowd is pretty large and they might be just as well-informed as you are. Not everyone will be willing to pay a registration fee for high quality, detailed and up-to-date information about foreclosures so it’s a good investment. “Bird-dog” is alive and well and still making a living out of information.