Re: FORECLOSURES - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on December 20, 1999 at 13:20:03:
The key to making money with ANY real estate purchase is knowing your marketplace (ie: a particular home’s value).
You make money in foreclosures in the same way that you make money with any other property. You buy at the right price, and know your exit strategy.
There are 2 basic ways to obtain these properties.
- Directly from the owner as a PRE-foreclosure, or
- At auction, or your state’s formal legal foreclosure proceeding.
When dealing with PRE-foreclosures, you will be trying to understand the needs of the seller. Most of the time, the seller will just want to keep a foreclosure off of his/her credit record. So, you might be able to pick up the home by simply bringing the loan current. Sometimes, they might need a little cash to move. So, if the deal allows, you might throw a couple of thousand their way to encourage them to accept your offer. If they are strapped for cash, the thought of getting their hands on a couple of thousand dollars within a week or two is quite motivating. Other times, they will be unrealistic in their needs, and, if no other investor solves their problem at this stage, you might be able to buy it at the foreclosure proceeding.
At the auction, you’ll need to perform a more thorough “due diligence” since the property is usually sold “as is” without warranty or guarantee. Also, depending on where you live, you may have stiff competition for these homes from other investors who buy these properties all day long. Hence, it becomes even more critical that you know exactly what you’re bidding on, set an upper limit for purchase, and STICK TO IT! Sometimes, these other investors will bid up a property when they see someone inexperienced bidding against them. They do this in order to discourage you. And, it certainly can be discouraging IF you pay more than you wanted to pay for a property.
Keep in mind that the condition of a property can change substantially during foreclosure. A property that looked good when you were planning to buy it PRIOR to the auction, could have been trashed by the owner as they left. Some owners become frustrated and devalue the home in this manner. So, without knowing this, a home that needed $2,000 in work a couple of weeks before the auction, may need $12,000 in work once you buy it at auction. This little surprise can turn a good deal into a bad deal.
If you decide to bid at auction, I’d suggest that you attend a few without bidding to see how they work.
I hope this helps.
Bill K. (AZ)