Are foreclosures too risky? - Posted by Jim C

Posted by B. Conley on November 04, 2000 at 22:46:23:

The biggst risk is taking no risks

Are foreclosures too risky? - Posted by Jim C

Posted by Jim C on November 03, 2000 at 23:50:43:

I read a post a while ago about doing deals with forclosures. I read that they were pretty risky and that maybe beginners should stay away from them. Is that true?

I am looking to rehab and flip homes, and I have yet to complete a deal. I just got a huge list of foreclosures in my area. I’m pretty excited about it and it sounds like it would be a good area to go with. Why are foreclosures risky, if they even are?

And should I stay away from them?

Thanks a lot!!!

An example of using common sense. - Posted by Stew (NE)

Posted by Stew (NE) on November 04, 2000 at 18:11:34:

I found a property that has an original first value of 83K on it and a second of 35K. I started negotiating to get the second for 10K thinking that the 83+10K+10K fix-up = 103K for th entire deal. FMV of 122K. 19K spread. Luckily, I have a friend at a title company who I do all my sales thru that double checks my numbers. She goes. Hmmmm The house was built in 1977. They stop paying a year ago. I quickly found out from the second how much was left on the first. He said 77K. He was right of course. But then if you figure all the missed interest for a year plus attorneys fees etc… I now know that the bid for the first is going to open around 95. If I add 95K + 10K + 10K of fixup cost. I get to 115K. Thats only a 7K spread. Will I stay away and never do this again because I might have messed up. Not me. Next. P.S. If any of this makes no sense it means you need to study some more. Good Luck

Re: Are foreclosures too risky? - Posted by B.L.Renfrow

Posted by B.L.Renfrow on November 04, 2000 at 10:04:16:

Not sure whether you’re referring to REOs, which are properties that have been foreclosed and taken back by the lender, or pre-foreclosures, where the owner is in default and at risk of foreclosure.

Since you talk of a list, probably you’re thinking of REOs. Those are quite safe…just not where the best deals are found, in my opinion. Since foreclosure wipes out virtually all existing junior liens, they do not carry an inordinate degree of risk.

Pre-foreclosures typically offer the best deals. Yes, there are risks, but as the post below notes, not any worse than any FSBO.

Just make sure you check the title and do all the usual stuff, and you’ll be fine.

Brian (NY)

Re: Are foreclosures too risky? - Posted by Lynn

Posted by Lynn on November 04, 2000 at 09:46:59:

I guess I missed the post that you are referring to, but I think that it would be a mistake for beginners to overlook foreclosures. Foreclosures aren’t any riskier than buying from a FSBO - Just do your due diligence! Failure to know “all” of the facts will get you in troulbe on any deal.

Happy Investing!