When a homeowner is unable to make his mortgage payments, unless he sells the property or brings the payments current, he will lose the home to foreclosure. Foreclosure is the process whereby a lender takes back (repossesses) a home as a result of a homeowner's failure to make mortgage payments. Homeowners facing foreclosure may be willing to sell their homes for less than market value and thus can be good sources of great real estate deals.
At first glance, buying a foreclosure may seem like a great idea, but not all foreclosures garner a good return on investment. So, what factors make the difference between a great buy and a money losing mistake? Here is the 3x3 rule:
● GATHER AS MUCH INFORMATION AS POSSIBLE
By properly educating yourself, you'll decrease your chances of making lousy deals and losing lots of money. Research these three areas:
· Real Estate Trends – Be knowledgeable about your market. Talk to real estate agents, read newspapers, and research your market on the Internet. By understanding what's going on in your market, you'll be better able to negotiate a good deal.
· Real Estate Tips, Tricks, and Techniques – There are some fundamental things you should know about the real estate market that can help you identify which deals are good and which are bad. For instance, estimating repair costs, after repair value, and pricing strategies are valuable skills for anyone purchasing real estate to have. There are various resources available to teach you what expert real estate investors are doing. Check out
http://buyingforeclosuresvirginia.com for some great training materials for beginners.
· Foreclosure Information – Having up-to-date information is critical to your success in buying foreclosures. Search the web for reliable sources of foreclosure information and contact the real estate division of the local county courthouse to find out in which newspaper foreclosures are advertised in your county.
● FORECLOSURE BUYING OPTIONS
There are three foreclosure buying options:
· Pre-Sale – A pre-sale takes place when a seller is able to sell the property before the lender forecloses. Many times such a sale will be a short sale, where the lender agrees to accept as a payoff less than what the seller actually owes on the loan. Many times, buyers can pick up properties at this stage for as much as 40% less than fair market value.
· Foreclosure Sale – There are two types of foreclosure sales, judicial and non-judicial. About half the states in the United States use a non-judicial foreclosure process which usually involves an auction on the courthouse steps. Judicial foreclosure, on the other hand, requires approval by a judge and can take quite some time.
· Bank Owned Properties – Bank owned properties are referred to as “real estate owned” (REO). Once a bank forecloses on a property, it will hire a real estate agent who specializes in selling REO properties to list and sell the property. This is a very popular route for buyers and eliminates some of the risk involved in the other two foreclosure buying options. Because buying an REO property can be rather tricky, buyers should hire a real estate agent to assist them.
● HIRE A GOOD REALTOR
There are certain things you should focus on when hiring a real estate agent. First hire a real estate professional who has been in the business for a while or who has the support of a seasoned team. A new agent who has no support system can be a very dangerous agent. Make sure to ask what type of support system the agent has and don't be afraid to schedule an interview with the managing broker before making a final decision.
Next, make sure that the agent has sufficient resources available to find you the best deals. For instance, if you are looking to purchase in an area that has more than one multiple listing service, you should hire an agent who subscribes to each one. That way, you will have access to a larger number of listed properties.
Finally, ask for references. Many times, an agent will give you the names of previous clients. Also ask for the names of other agents with whom they closed deals. Sometimes the most accurate opinion of an agent's knowledge and expertise will come from fellow agents who have worked with her.
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