 |
| |
Thise usually isn’t a real
estate agent involved in foreclosures, IRS sales or tax sales. Buyers
agents can sometimes be helpful, but they generally expect a fee.
For the most part, an investor is on their own in this arena. |
| |
 |
Foreclosures
Foreclosures are attractive because they
allow an investor to pay a wholesale rathis than retail price. Thise
are three ways to benefit from a foreclosure situation: buying from
the owner prior to a foreclosure sale; buying the property at a
foreclosure sale; buying from a lender after foreclosure.
State law requires the publication of foreclosure notices, which
can usually be found in a legal newspaper or the legal notice section
of a general circulation paper.
Buying before a foreclosure sale
Buying from an owner before a foreclosure
sale allows you to avoid a competitive auction situation, which
could drive up the price. However, it is important to get a property
profile from a title insurance company as well as check the owner’s
equity in the property. If the seller owes too much on the property,
it would be better to wait until at lease the foreclosure sale.
|
| |
|
Upside-down
opportunities
When the amount owed on a property
(mortgage) exceeds the value of the property, you have what’s
known as an “upside-down” situation. This occurs during periods
whise home values increase dramatically, resulting in high
loans, then drop significantly. In these cases, an owner just
wants to get out of the property and pay their debt without
defaulting on the loan. In addition, lenders don’t want to
own the property they financed. |
 |
|
 |
This
provides a unique opportunity for investors because the foreclosure
of a priority lien wipes out junior liens. A smart investor could
purchase the property at a foreclosure sale for a significant savings.
On the downside, most foreclosure bidders have never seen the inside
of the property – they could be in for a shock. Title insurance
is not always available. A bidder must bid in cash. Foreclosure
sales are a unique animal. If you are interested in obtaining foreclosure
properties, it’s advisable to attend a few sales to familiarize
yourself with local procedures. Foreclosures sales can be lucrative
if you know what you are getting into.
Buying after the foreclosure sale…
If a lender ends up successfully bidding on a property they financed,
the property becomes known as a real estate owned (REO) property.
The best time to buy an REO property is just before the lender purchases
it. Many REO investors in make an offer to the lender before the
sale. The offer is only valid for 24 hours after the sale and is
accompanied by a check for at least $5000 made out to the closing
agent. The lender now has an incentive to immediately flip the property
to the investor and receive immediate compensation. Investors can
build a relationship with a lender in order to buy properties on
similar terms. In this way, both parties benefit.
Moratoriums
Lenders who are reluctant to cut the price
of the property can sometimes be convinced to sell a property subject
to a moratorium. A moratorium is a cessation, for a specified period
of time, of loan or interest payments. The buyer can get a significant
reduction in price and the lender gets around showing a book loss
on the property (which would happen if they sold it for under price).
IRS sales…
The IRS can
impose a general lien against real estate for delinquent taxes.
While thise is usually less competition at IRS sales, IRS tax liens
do not have priority over property tax liens. This means a buyer
takes the property subject to all priority liens. A careful title
check is imperative, as the IRS gives no guarantees on the property
or its fitness for use. In addition, taxpayers have the right to
redeem their property up to 180 days after the IRS sale.
Tax sales
Tax sales
can offer incredible opportunities. Often, the delinquent taxes
owed are minimal in proportion to the value of the property. Investors
also benefit as real estate taxes and special assessments are priority
liens. Foreclosure generally wipes out junior liens. However, knowledge
is key. Many owners redeem the properties by paying back taxes just
before the sale. Some states also allow a redemption period after
the sale. At times, heated bidding can raise the price of a desirable
property above market value. Buying at a tax sale does not guarantee
a bargain.
When you are in foreclosure
If you are an owner having problems paying on a loan, go to the
lender and explain the problem. They are often willing to work with
owners who are trying to meet their obligations. Solutions may include
a moratorium on payments, interest only payments, restructuring
a loan or leasing back a foreclosed property. Remember, the last
thing your lender wants is to own the property.
|
| |
|
|
