What is a Foreclosure?
A property goes into foreclosure when a Lender/Lien Holder/Bank repossesses &/or sells a property due to lack of payment. Here’s how the process works:
In the Pre-Foreclosure Period a borrower misses loan payments and the Lender/Lien Holder files a Notice of Default or Lis Pendens.
Next is the Reinstatement Period with one of these outcomes:
- In some cases the borrower is able to reinstate the loan by bringing payments up to date or through loan mitigation/negotiation
- Occasionally a third party purchases the home and pays off the loan prior to foreclosure
- Or the Bank approves a short sale instead of foreclosure
If there is no resolution to the default, the Lender files a Notice of Trustee’s Sale and the property is advertised for public auction on the Courthouse steps.
Properties not purchased at auction are repossessed and become REO Properties (Real Estate Owned) and are listed for sale with an REO Specialist or Realtor®. The government repossesses properties that were purchased with a HUD or VA Loan. These properties become GOV Properties (Government Owned) and the appropriate government agency handles the property sales.
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Buying a Foreclosure - How do I buy a pre-foreclosure or foreclosure property?
The Home Buying Process for distressed properties is very similar to a “regular” purchase with a few nuances and potential pitfalls that vary by situation. For example:
During the Pre-Foreclosure or Reinstatement Period, a home can be purchased directly from the owner in default for the amount owed to the Bank. The caveat is in finding a property that is not over financed. Title Searches and Inspections are a MUST in these situations to confirm that the Seller has fully disclosed everything you need to know about the property and is able to convey a clear Title at Closing.
Another way to buy direct is through a Short Sale. Properties in this category are usually encumbered with loans that are equal to or greater than the property’s current market value. To avoid the expense of repossession, Banks have been accepting 60% to 80% of the loan balance in many recent short sale situations. ALL Lenders involved MUST approve ALL offers which happens at a snail’s pace. Lenders are overwhelmed with huge inventories of distressed properties. It can take as much as 60 to 90 days or more for the Bank to even review an offer, much less accept it. Therefore, buying a short sale requires a ton of patience.
Buy at Auction
Auctions are held in both the pre & post foreclosure stages. Most people have heard about foreclosure auctions on the Courthouse Steps (held the first Tuesday of every month in Georgia). Thanks to the recent turmoil in real estate markets across the Country a new opportunity has arisen; Lenders are now hiring Professional Auctioneers to hold highly advertised, pre-foreclosure auctions to liquidate properties.
Both of these situations provide opportunities to purchase properties for as much as 20% to 40% less than market value. However, these purchases usually require cash (due at Auction) and there is little or no chance or time to perform proper Due Diligence (Inspections, Title Searches, etc.). The old cliché’ “Buyer beware” definitely applies here.
Buy an REO or GOV Property
These properties have already been repossessed and are listed with Realtors® or REO Specialists. There are many expenses associated with repossession including clearing Title, repairs, carrying costs, maintenance & marketing. These items have already been addressed on most REO & GOV properties, which is an advantage. However, these expenses are factored into the list price and can negatively impact the “deal factor”.
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Finding Foreclosures - How do I find pre-foreclosure & foreclosure properties?
Contact me ASAP! Please provide a few details about your ideal property via my Atlanta Home Buyers Registration form.
Too excited and can’t wait to get started? Visit the following links and contact me to discuss details:
TIP: There are tons of sites that offer detailed info about foreclosures. Some are free and some charge a fee. Some are better than others, depending on your specific needs. Be sure to carefully evaluate & compare each site’s terms and services before making a commitment.
How do I pick the right part of town?
Avoid areas that are riddled with foreclosures, neighborhoods where more than 10% of the total homes are for sale and new developments with ongoing construction.
Be wary of in town, gentrifying neighborhoods; the low prices may seem attractive, but values may not appreciate as quickly as other areas.
Focus on established areas with good schools, shopping and easy access to transportation & major roads to minimize risk.
How do I learn to properly evaluate investment opportunities & strategies?
As your Realtor®, I have all of the right tools, data, statistics and experience to help you make the right decision. Contact me directly at (404) 372-9556 or email me at email@example.com TODAY to get started!
TIP: To learn more about how to properly build your real estate portfolio, I highly recommended reading one or both of the most comprehensive guides on real estate investing available; “The Millionaire Real Estate Investor” and “Flip”. Reading these guides is like “Real Estate Investing 101 & 201” without having to go to class. BTW, this is not a shameless ploy to promote Gary Keller’s books; they would be suggested even if I wasn’t a Keller Williams Agent.
Based on extensive research and interviews with more than 120 millionaire real estate investors, Gary Keller's "how-to" guide reveals the models, strategies and fundamental truths millionaires use to become wealthy through real estate investing.
But the book isn't just about real estate. It also takes a hard look at the money myths that hold some people back and the money truths that let others soar. The book begins by exploring the "MythUnderstandings" about the way people view investing. For example, Keller explains, despite what most people think, investing by definition and design isn't risky. Millionaire real estate investors employ time-tested strategies to avoid risk and, in the end, take luck out of the game.
FLIP is the third book to be released in the best-selling Millionaire Real Estate Series and provides a step-by-step guide to successfully finding, fixing and selling investment properties.
At the heart of FLIP is a proven five-stage model that really works in any market:
1. FIND: Select ideal neighborhoods, search for houses, and attract sellers
2. ANALYZE: Identify the improvements and analyze the profit potential
3. BUY: Arrange financing, present the offer, and close on the purchase
4. FIX: Develop and execute an improvement plan on time and in budget
5. SELL: Add finishing touches to quickly sell for maximum
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