|
When people talk about purchasing foreclosures, they may be talking about pre-foreclosures or purchasing a property at an auction by attending an auction or sheriff's sale or after an auction, when the property's been foreclosed and is owned by the bank.
The system for buying pre-foreclosures start with, find a foreclosure, contact the owner, determine the value, analyze and inspect the property, negotiate, signing a contract, check the title.
How do you find foreclosures? You can check your courthouse, title company, legal publications or newspapers or look on the Internet. Then you're going to need to contact the owners, and you can do this in person or you can send them letters or post cards. Make phone calls. The best way to contact the owner, in person, is the gentle approach. Knock on a door. Introduce yourself. Tell them that you really like the area and you're looking to buy a house. Tell them that someone told you that their house might be available for sale.
Direct approach. Let them know that you noticed that their house is in pre-foreclosure. Tell them that you may be able to help them. Ask them if they have considered selling their house. Then you must determine the value. Pre-foreclosure is the best time to buy if there's equity. Rule of thumb? Never pay more than 80 percent of the value. Minimum of 20 percent equity after they've fixed it up. Figure equity by taking the MV and subtract the principal balance, plus all costs to bring the loan current and stop the foreclosure, including back payments, attorney fees, court costs, penalty fees and other liens or judgments there is. So don't forget the fix-up costs.
Talking and negotiating with owners are key. Try and find what their needs are. Do they want to stay? Do they need money to move? Sometimes, the owner is in denial. So help the owner face the fact that they'll lose the property. Some key points to make them aware of is, they will lose the roof over their head, plus, they'll lose all the equity that they've built up. They'll lose any chance of having decent credit for several years. Ten to twelve years to be exact.
Now if they are willing to talk, try and find out what is happening. Then offer to try and find a solution. Things you'll need to know in order to help are, why they stopped making their payments? Do they have a place to go? Are people hounding them for money? Do they need money to bring utilities current? Sometimes they're just going to walk and will quitclaim the property to you, just to save their credit.
Now let them know what you can do for them. Tell them you can bring them current, their loans. This will stop the foreclosure and save their credit. Let them know you can pay their first month's rent and deposit or you can pay their utility bills, so they can have utilities at the new place. Or you could give them money once they move out. The main thing they need to understand is that you need to stop the foreclosure now. See if you can get them to sign the deed, quitclaim or warranty deed.
Well there you have it...the mystery of foreclosure revealed! For information on how anyone can make a killing in foreclosures without big down payments, good credit or dealing with any smug lenders, take a look at my Foreclosure Files course.
Good luck!
Article by Lou Vukas. Copyright © 2006. All Rights Reserved.
|
|
|
