Posted by Ronald * Starr(in No CA) on July 16, 2002 at 22:11:59:
Well, when working foreclosures, one has to be selective. Many of the properties going to sell will have no equity. But, some will–those are the ones you try to buy.
Now, OH, I think, sets the minimum bid at a sheriffs sale at 2/3 of appraised value, thus assuring the property owner of no bids being just–say 40% of property value. But, if the amount owed is greater than the 2/3 figure, the lender may compete with bidders, as their bids cost them nothing until they have bid in all of the amount that they are owed. At which point they should stop bidding.
What you need to find is properties where the appraised value is lower than true market value and the loan amount is less than 2/3 of the appraised value. The lenders should not bid up over what they are owed, since there is no benefit to them–the excess proceeds after paying the lender off go to the property owner. Or, if there are junior obligations it will cascade down to the juniors, which reduces the debt owed by the owner/former owner.
If the bid is lower than 2/3 of actual market value, you might get a property for 45%-60% of market value.
I don’t know what percent of foreclosure properties meet the two standards I mentioned above. And, you need to check, since it is a judicial foreclosure, whether there is some redemption period. That is not something investors like.
If you get into foreclosure investing, I recommend going into the law library and reading up on foreclosures, collection of debts, sheriff’s sales and so on. Then watch some sales before you start bidding. Get familiar with how it works. Research some of the properties that seem promising and then follow them to sale. If there are other knowledgeable bidders at the sale, try to get their viewpoint on the properties that you researched, to see if you are missing things or not.
Good Investing***Ron Starr