I was sitting in a local restaurant by myself for lunch this week when I overheard two gentlemen talking about foreclosure properties. Both of these men had their own opinions regarding the market and where to find the best deals. It was interesting listening to both men’s opinions and interesting enough, both of them were wrong. It is amazing how many people claim to be subject matter experts but have no formalized training or accreditation to support their hypotheses.

According to national statistics there are approximately 2,203,295 foreclosure filings and about 1,285,873 foreclosed properties on the market today. The substantial increase in foreclosures has flooded the supply of available properties which then forces home values to decrease. We all learned about supply and demand in high school economics class and many home owners are feeling the effects today.

Finding that deal may not be as easy as it may seem, you need to look beneath the dirt. Understanding the value of a home, cost of repairs and legalities of submitting an offer is critical and you need the help of a licensed Real Estate Expert to navigate you through the foreclosure maze. Get with a Realtor team that has the resources and connections to help you with every step of the purchase transaction.

Great Realtors, or as I call them the top 1%, will have a “Dream Team” that will be able to work with the client. They will have a solid mortgage broker, a reputable property appraiser, a reliable insurance agent, a mold consultant, a conscientious property inspector, an esteemed general contractor and a renowned ASP certified staging professional. Being able to go to one Realtor and obtain all the necessary professionals to complete a transaction is critical.

Having a team of these professionals will reduce your exposure of making a mistake and buying a home that is not of value or has too many substantial repairs to make it worth the investment. It is important to use a professional Realtor who is experienced, trustworthy and a true professional.

Here are some essential tips you need to know when you start your foreclosure prospecting.

Pick out a geographical area that you would be okay with living, even if this is a property you plan on using as an investment. It is easier to rent a property with outstanding schools, shopping and amenities. Understanding and qualifying the benefits of a surrounding area will ensure you are picking a good location. A Realtor can provide you with any additional information you may need to pick the area. Understand and research the average dollar per square foot for homes in the area you are looking. If you are looking at foreclosure properties that are $ 39 per square foot and the average home price is currently selling for $ 52 per square foot are you getting a great deal? The truth in the matter is that if the property you are looking at is a 3 bedroom, 2 baths, and 2 car garage property and is 1700 square feet, your deal is only $ 22,100 less than the average home price. Now add into that your repair cost then ask yourself again is this a good deal. If your repair cost in this example exceeds 50% of the difference, you are probably better off not purchasing a foreclosure and going with a turn key property. Understand the foreclosure law in your own state. You can research this easily enough on the web. You should know the difference between Foreclosure by Judicial Sale and Foreclosure by Power of Sale. You will need to pick a 1% Realtor to assist you in selecting properties. They will listen to what you are looking for and search for homes that exceed your criteria but still within your price range. They will be able to conduct a market analysis on the area to provide you with sales data of homes that sold in that area. They will also arrange for all the showings and provide you with listing flyers that give you pertinent information. And as stated earlier, a 1% Realtor will give you access to their Dream Team of real estate professionals. Once you narrow your search down, you will need to determine an offer. How much should you pay is a question that your Realtor should be able to help with. Extremely inexpensive homes that are substantially lower in price than the market average maybe the best buy depending on the repair cost. The only other advice I can give on making an offer or bid is you need to be decisive and take action. I have had several clients second guess the market and like the two men from lunch determine that the market has not hit bottom yet and that there are better deals out there only to have the right property sold from right under their noses. The great deals don’t stay on the market long so you need to be able to act fast. Most banks require proof of funds or for you to be pre-qualified before you bid or make an offer on these foreclosed properties.

The bottom line is there are great deals beneath the dirt of a foreclosure. Having a vision of what that looks like for you as the buyer is important. Understanding what you are looking for in a property a year from now is the perspective that you need to have. Many clients that buy homes spend money on remodeling, changing out carpets or cabinets, or putting in new floors. If you are going to go through and spend money on a property improving it to your taste why not get that property at a bargain-basement price. If you are interested about Real Estate Dream Teams please see my website www.fortmyers-naples-realestate.com.

 

According to national statistics there are approximately 2,203,295 foreclosure filings and about 1,285,873 foreclosed properties on the market today. The substantial increase in foreclosures has flooded the supply of available properties which then forces home values to decrease. We all learned about supply and demand in high school economics class and many home owners are feeling the effects today.

 

Finding that deal may not be as easy as it may seem, you need to look beneath the dirt. Understanding the value of a home, cost of repairs and legalities of submitting an offer is critical and you need the help of a licensed Real Estate Expert to navigate you through the foreclosure maze. Get with a Realtor team that has the resources and connections to help you with every step of the purchase transaction.

 

Great Realtors, or as I call them the top 1%, will have a “Dream Team” that will be able to work with the client. They will have a solid mortgage broker, a reputable property appraiser, a reliable insurance agent, a mold consultant, a conscientious property inspector, an esteemed general contractor and a renowned ASP certified staging professional. Being able to go to one Realtor and obtain all the necessary professionals to complete a transaction is critical.

 

Having a team of these professionals will reduce your exposure of making a mistake and buying a home that is not of value or has too many substantial repairs to make it worth the investment. It is important to use a professional Realtor who is experienced, trustworthy and a true professional.

 

Here are some essential tips you need to know when you start your foreclosure prospecting.

 

Pick out a geographical area that you would be okay with living, even if this is a property you plan on using as an investment. It is easier to rent a property with outstanding schools, shopping and amenities. Understanding and qualifying the benefits of a surrounding area will ensure you are picking a good location. A Realtor can provide you with any additional information you may need to pick the area. Understand and research the average dollar per square foot for homes in the area you are looking. If you are looking at foreclosure properties that are $ 39 per square foot and the average home price is currently selling for $ 52 per square foot are you getting a great deal? The truth in the matter is that if the property you are looking at is a 3 bedroom, 2 baths, and 2 car garage property and is 1700 square feet, your deal is only $ 22,100 less than the average home price. Now add into that your repair cost then ask yourself again is this a good deal. If your repair cost in this example exceeds 50% of the difference, you are probably better off not purchasing a foreclosure and going with a turn key property. Understand the foreclosure law in your own state. You can research this easily enough on the web. You should know the difference between Foreclosure by Judicial Sale and Foreclosure by Power of Sale. You will need to pick a 1% Realtor to assist you in selecting properties. They will listen to what you are looking for and search for homes that exceed your criteria but still within your price range. They will be able to conduct a market analysis on the area to provide you with sales data of homes that sold in that area. They will also arrange for all the showings and provide you with listing flyers that give you pertinent information. And as stated earlier, a 1% Realtor will give you access to their Dream Team of real estate professionals. Once you narrow your search down, you will need to determine an offer. How much should you pay is a question that your Realtor should be able to help with. Extremely inexpensive homes that are substantially lower in price than the market average maybe the best buy depending on the repair cost. The only other advice I can give on making an offer or bid is you need to be decisive and take action. I have had several clients second guess the market and like the two men from lunch determine that the market has not hit bottom yet and that there are better deals out there only to have the right property sold from right under their noses. The great deals don’t stay on the market long so you need to be able to act fast. Most banks require proof of funds or for you to be pre-qualified before you bid or make an offer on these foreclosed properties.

 

The bottom line is there are great deals beneath the dirt of a foreclosure. Having a vision of what that looks like for you as the buyer is important. Understanding what you are looking for in a property a year from now is the perspective that you need to have. Many clients that buy homes spend money on remodeling, changing out carpets or cabinets, or putting in new floors. If you are going to go through and spend money on a property improving it to your taste why not get that property at a bargain-basement price. If you are interested about Real Estate Dream Teams please see my website www.fortmyers-naples-realestate.com.

When you buy foreclosed property, on the other hand, there will likely be no contact with the homeowner and it may be impossible to inspect the property at all. And since foreclosed properties are sold, as is, you will be stuck with any issues that arise after purchase and will even inherit any liens that are attached to the property. This means that you better do homework before purchasing the property.

How to Research a Foreclosed Property

When an investor is first getting started in real estate, it is common to make mistakes. You will likely make mistakes also, but you will learn from them and become a better investor because of them. Regardless of how much you learn, though, mistakes cost money, money that will be subtracted from your profits. This is why its very important to do all that you can to avoid mistakes when buying foreclosed properties. Heres how.

Perform a title search to make sure that there are no liens on the property. If there are liens, you will be responsible for them upon taking possession of the property.

Determine the market value of the property through appraisal or broker opinion. Find out how much the defaulted loan is for and subtract it from the market value. This is your potential profit.

Subtract from your potential profit any repairs that need to be done and any liens that are on the property.

Subtract any expenses that you will incur while holding the property: taxes, loan interest, closing costs, and brokers commission.

Now you are left with your potential net profit. Figure up how much of it you are willing to sacrifice to increase your maximum bid price.

Set a maximum bid price and stick to it.

If the numbers dont add up or the potential profit doesnt seem worth the effort, the researched property is likely not a good investment property. But dont worry. If you keep looking and researching, you are bound to find the perfect real estate investment opportunity.

Before you decide to invest in a foreclosed home, you should familiarize yourself with both the advantages and disadvantages of this type of property investment. Knowing what youre getting into ahead of time may just save you a lot of hassles and headaches down the road.

There are three foreclosure phases where it is possible to purchase a financially distressed property. These phases include the pre-foreclosure phase, the auction phase, and the REO (real estate owned) phase. Following you will find a description of the three phases along with the pros and cons for each.

The Pre-foreclosure Phase

This is the phase where the owner of the real estate still has control. He has defaulted on his loan and is facing pressure from his lender to pay up or face the consequences. He is desperate to sell the property and clear his credit; this could add up to big savings for you.

Pros

Discounts from 20 to 35 percent

Low down payment

Opportunity to inspect and research property

Flexible sales agreements

Cons

Absent or unreachable property owner

Tough competition

A great deal of courthouse research

There may be liens on the property

The Auction Phase

This is where the most money can be made buying foreclosed homes. At auction, the foreclosed property is sold to the highest bidder. If you do your homework before hand, you could realistically buy a property for a fraction of its value.

Pros

Discounts from 34 to 45 percent

Excellent return on investment

Highest profit potential

Cons

Not able to inspect property

Auctions can be postponed

Need large cash down payment at auction

Improper research can lead to disaster

Could invest a lot of time and still not win the property

The REO Phase

The REO phase occurs when the lender seizes control of the property in order to resell it and cut its losses. Since the property has no value to the lender unless it sells, the lender is often extremely motivated to make a quick sale.

Pros

Discounts from 5 to 15 percent

Title free from liens

Tax arrearages paid

Lender may do repairs or offer discount for repairs

Cons

Low return on investment

Remember; when you invest in real estate, there is a certain amount of risk that you must take in order to make a profit. This means that the properties that offer the most potential returns are the most risky. Be sure to calculate how much risk you can afford to take before investing in foreclosed homes.