How to Find Foreclosures – Where Do I Start?
Many homeowners who gorged on debt during the real estate boom a few years ago are now starting to feel the squeeze. They’re struggling to keep up with their ballooning payments or, worse, losing their homes to creditors.
As the number of foreclosed properties continue to rise, new opportunities await for others. These are fast becoming ideal market conditions for a niche group of real estate investors called foreclosure gurus. They can deliver homeowners fast cash in return for their property which is inevitably sold at a nice discount. These type of foreclosure gurus used to post ads in the newspaper or staple ads to telephone poles but now there are several websites that make finding forclosures much easier.
Here are some beginner tips for those of you wondering where to start in the foreclosure market:
- Check out a couple of the new online services like propertyshark.com and foreclosures.com (aff). These foreclosure listing sites provide the latest foreclosures in your area and often include the amount owed and the estimated value. The amount of time you save by using these sites versus having to find foreclosures the old-fashioned way is well worth the expense if you’re serious. Both of these websites provide a free trial so you can test the site out before you commit to their paid service.
- Don’t even bother attending public foreclosure auctions unless you’re a pro. Despite what you may read in foreclosure books, typically these auctions are controlled by banks and other big lenders so the chances of you actually nabbing a foreclosed property are pretty slim. Instead, use an online service like the ones I mentioned above to find a property right after it goes into default. During that time there is a brief window to negotiate directly with the property owner which is your chance to get the property before it even hits a public foreclosure auction.
- After spotting a property online right after it goes into default, you’ll want to get in touch with the property owner or their lawyer. Your goal here is to ask the owner if there is any way to negotiate a purchase of their property before it goes into auction. Most of the time especially if you speak with the attorney, the answer is going to be a firm no. If that’s the case, it’s best to go down to the property and find the owner directly. The lawyer is less likely to cooperate because there’s usually no additional benefits for them to work out a deal before it goes into foreclosure.
- If the owner is willing to work out a deal then you’re in good shape and it’s time to negotiate a price and terms. If not, you might have to get creative and see if the owner is willing to become your partner. What you can do is promise to solve the owner’s immediate problem by paying enough mortgage-backed payments to get the loan out of default. In order for this to work you have to exchange for the deed to the property and potentially provide the owner with a temporary apartment if you need to refurbish their home. Then once you sell the house, you give the owner a check for a portion of the profit which typically ranges between 10 to 20%. If neither one of those strategies work, it’s probably best to move on to another foreclosed property.
These are just a few techniques to get you started in the foreclosure market. Being a newbie and dealing with a risky yet high reward investment you’ll want to be careful especially the first time. Don’t feel like you need to rush into things as the good news is forclosures are continuing to rise so there’s going to be a lot of inventory in the coming months. There will be plenty of opportunity for you to find foreclosures so don’t get frustrated if the first 5-10 properties you inquire about don’t end up the way you want it to. Keep reading articles on my blog and educate yourself so you’re comfortable before you make a move.