Posted by B.L.Renfrow on September 05, 2003 at 08:10:46:
Well, sure. Just realize it is all about the numbers, and you never have to have any particular deal. It’s often said that the “deal of the century” comes around about once a week.
If you are interested in preforeclosure investing, I suggest you read everything on this site you can find about the topic, which will probably take you a couple days. You have to realize that most people who are about to lose their homes have been affected by a combination of bad decisions and often some bad luck. As you see by your example, often this poor decision-making continues to be a factor. Many folks in this situation either bury their head in the sand, or they truly think some miracle will occur at the last minute, preventing them from losing their home to foreclosure. That’s why you see homes about to be foreclosed offered for sale at full (or above) market value, and why the homeowners often are unreceptive to what seems, to us, a good solution. Sure, the homeowner may be the one to call you, but once he finds out you’re not going to pay FMV plus give him cash, he’s not interested.
Here’s how you can be “ahead of the game”:
First, as I mentioned above, read, study, learn…repeat over and over. Next, realize that there is no such thing as risk-free real estate investing. Some areas are riskier than others, but there’s always risk. If there weren’t, as the cliche goes, everybody would be doing it. Your job is to learn how to mitigate the risks, so your first deal doesn’t become your last.
If you decide the preforeclosure area is where your interest lie, one of the first things you need to learn – and actually this applies to any area of RE investing – is how to quickly determine the value of any given property, so you’ll know a good deal when you see it. The best way to do this is to get a list of recently sold properties, either from your county clerk or recorder’s office, or from a friendly RE agent, and drive around looking at them. If you do this long enough, pretty soon you’ll have a good idea of what similar properties could sell for.
Next, if you’re going to invest in foreclosures, you’re going to need cash, to make up back payments. If you don’t have cash, you need to generate some. There’s nothing riskier than an investor in the middle of a deal, and for whatever reason you can’t find a buyer, or a property needs repairs, and you don’t have the cash to make the payments. That’s a fast trip out of the business. You can get cash in plenty of ways: a job, doing some wholesale assignments, partners, etc.
Next, you’ll need to be prepared to show the lender you can perform. Every Larry, Moe and Curly thinks they’re an investor these days, and many lenders’ representatives are tired of wasting their time with wanna-be investors who have no money and can’t perform. I like the suggestion made by someone else in a recent thread, which was that one of the first things you should ask the lender is where to send the money for the arrears. If they know you actually have the money and are willing to wire it or overnight a cashier’s check, they’re much more likely to take you seriously.
Now, you are talking about “once the ball is back in the lender’s court…” Are you talking about buying after the lender forecloses? Again, there aren’t too many good REO deals out there. Usually the lenders will list the property at FMV, even when it’s not worth anywhere near it. But, if you know your values, you’ll be able to recognize a good deal when one does appear. An idea often recommended is to just keep submitting your (low) offer every month or so, until either the lender accepts it or sells the property to someone else.
If you are considering bidding at the foreclosure sale, not to be pessimistic, but realize that foreclosure investing is NOT a safe area for newbies. Read Ron Starr’s posts on that issue. He knows what he’s talking about. Before you think about that area, you have to know your state’s foreclosure laws cold…and they are different in every state. And you have to have immediate access to cash.
This has gotten longer than I intended…hope it gives you some ideas.
Brian (NY)