Winning Tips To Buy Foreclosed Homes

Buy a Foreclosure Home To Live In (as your primary Residence)

2010-09-01T17:22:00.000-07:00

Why would you want to buy a foreclosed home as your primary residence? I mean, these homes are typically dirty junkers that need a lot of work... right?
Wrong!

Some of these homes certainly are junkers and don't deserve a minute of your time but there are a big handfull of homes that are pristine and ready for you to move in. There was a time when many of the homes that were being foreclosed on were total pieces of garbage. I remember seeing homes where it was obvoius the owner didn't care about it... and it wasn't just because they were about to lose it. Carpet and walls had years of abuse. The exterior was never personalized or even maintaned. The odor inside was... well... I don't want to lose my stomach talking about it. But I have seen a big change lately. It seems as though most of these people have been flushed out of the real estate market, or at least as owners. (sorry investors who are renting to 'these people')

So... back to the question... would you want one of these homes as your primary residence?

I have seen some fantastic homes hit the market recently. Homes that were million dollar homes, just a couple years ago can be purchased at 50% off (or more if done right). If you are in the $500,000 home price range (in my market), then the chances of you getting a move in ready home with little to no abuse, is really high! In fact, if you're in the $250,000 price range, these were $500,000 homes before and are, mostly, ready for you to move in too.

So... the answer is YES!

This is the time to get a home at a great deal and one you'd be proud to have as your own!

So how do you find a really well priced home? There are a couple ways to ensure you get a good deal. BUT You Have To Promise Me One Thing... DON'T FALL IN LOVE WITH ANY HOUSES! This is just as much a business decision as it is an emotional one.

When searching for a foreclosure home you'll want to get very familiar with the pricing for the area's you're interested in. When you see a deal you can jump on it. You should also do your best to know floorplans so when you see a square footage, you know which model it is and you can reduce your previewing time... in fact, if you know its the model you want, you'll be able to make an offer, sight unseen and undercut much of the other buyers out there. Remember, in most "traditional" real estate transaction you'll have some time to "back out" if you need to.

Another thing I'd recommend to get a FANTASTIC deal, is to go to the courthouse steps to buy your home. This is really only an option for States who foreclose using a trustee, and this would be a trustee sale at the courthouse steps. You usually need cash (read my post on how to buy foreclosures and make a profit for some insight into this process). There are some challenges with this and you need to watch for them so they don't become pitfalls. (again, refer to this post) Most of the buyers at trustee sales are investors. These guys/gals have a cut-off that's wayyyy below the market value on these homes, which will allow you to get a screaming deal. If there are no more people trying to buy that particular home as a primary residence, you'll have virtually NO COMPETITION.

This is a really tough market, even for buying foreclosed homes at the courthouse steps. You may want to have a "couple irons in the fire" to maximize your results. This blog doesn't typically address shortsales but in this strategy they may be a vital link to you finding the home you want. Since you've done your homework and know which models you are interested in, based on the square footage of the home... you can be the first to shoot out an offer to any and all of those shortsales that hit the market. With enough of these offers out (and no emotion... remember... this is a business decision) then you're bound to get a great house at a great deal... exactly what and where you want it.

If you're considering buying a home in the Riverside or are looking for houses for sale in Corona, CA then get over to my site and sign up as a vip buyer. I guarantee all my VIP Buyers will be in escrow on a home they want, within 45 days or I'll pay their mortgage (or rent) until they are in escrow! Go there today at http://buyer-guarantee.makecoronahome.com/

I wish you the best!!

40% Profit When Buying Foreclosed Homes... REALLY??

2010-05-06T11:16:00.000-07:00

In this post you'll find a lot of information but it's not meant to be a comprehensive, step by step guide to investing in foreclosures. If you are a serious investor or just beginning... and you want a comprehensive step by step guide to investing in foreclosures then (whether in California or not) you'll want to CLICK HERE. The information, in this post, is intended for those investing in homes in California.

Okay... my last two posts were laying down the basics, or "foundation" to keep the analogy within housing, and not really about how to buy foreclosed homes. Post one was What is a foreclosure or foreclosed home, and post two was Can I use financing when I buy foreclosed homes?

We are going to get into the meat and potatoes... or... structure (again, keeping the analogy within housing)

There are two investment strategies when you buy foreclosures. Those strategies are:

buy and hold
buy and flip

Each foreclosure investment strategy has its purpose, ups, and downs. Each strategy will usually attract a certain investor mindset too.

Subsequently there are two ways to buy foreclosures. You can:

Buy foreclosed homes that are being marketed on the open market, through a Realtor, or some other source (but you are not going to get a huge discount going this route)
You can buy greater discounted foreclosures by going to a "trustee sale" at the courthouse steps.

trustee sales are performed in California and a handful of other states. This information relates to trustee sales in California. Some states perform judicial foreclosures, some perform non-judicial (trustee sales) and some perform both. See a list of states with trustee sales here.

So... if you're going to buy foreclosures on the open market... your best strategy may be to buy and hold. And it's okay to buy a foreclosed home this way since an immediate profit is not your primary concern. You'll probably be buying that house at the current market value and your primary goal is to get a good "rentable" home. This investor mindset is typically happy to, at least, break even. However most will cash flow a couple hundred dollars a month. I'm not suggesting that as the BEST foreclosure investment strategy... but it is one.

Although we're in, what I call, a wholesale market you can still get deep discounted "blue light" specials when you buy foreclosures at a trustee sale auction. Again... I want to stress that this information only applies to California (and perhaps other states that liquidate foreclosures through the trustee sale, non-judicial foreclosure, process). Look at my What is a foreclosure or foreclosed home blog to get more information on that.

So, when investing in foreclosures, the buy and hold strategy is great and has its purpose. There is typically an initial outlay of money and not a huge immediate profit. here are a couple examples to see how your money is made when you buy a foreclosed home and hold on to it.

But this post is about making 40% profit when you buy foreclosed homes. How can that profit amount be possible? Is it legal?

Well, I already said that we're in a wholesale market and you'll probably realize a 40% increase in the future, when the values go up (again... think California and not Antarctica) but I'm not talking about appreciation over a 10 year span of time... I'm talking about cash in your pocket now! (and YES, of course it's legal)

To realize this kind of profit today and not have to wait for the market to return you'll want to buy at deep discounts and then flip those homes at, or greater than, market value for the immediate profit. You've got to do your homework but buying at a trustee sale may be the best way to see this kind of immediate profit. I've been tracking homes bought at the trustee sales, here in Corona California and have seen an average of 32% profit from the purchase to the sale. I've seen these profits as high as 63% and an average high of 41%. By the way... that's a gross profit, you can probably assume about 11% - 12% total cost to prep and re-sell.

So what are the mechanics of this and how do YOU make that kind of profit?

I recommend that you study a specific area and stick with it. If you know the market trends and pricing in a specific area it'll make it easy to spot a good deal, even if you haven't done the research.

You'll want to view the properties beforehand if possible. One way to see the homes is to check the MLS. Some homes that are listed on the MLS will not be sold through the market (for various reasons) and will end up being sold as a foreclosure home, on the courthouse steps. If you can peek into a vacant home or find another legal, tactful, courteous way to see the inside of homes, you really want to be able to assess any repairs that will need to be factored in to your bottom line. There's a belief that you need to buy a fixer and restore it to make money... NO WAY! I'd buy a home that doesn't need much work, if any at all. That way you get that house on the market fast and you minimize your risk. I recommend to make it better than it was when you bought it but that may only need to be paint and carpet... and that's a good investment!

You'll want to ensure that the liens will be wiped out in the foreclosure sale... YOU MUST MAKE SURE THE LIENHOLDER FORECLOSING IS IN FIRST POSITION*. Yes... all junior liens are supposed to be wiped out in a foreclosure sale (if the first position lienholder is the foreclosing party) however some Homeowner's Associations (HOA's) will hold their services ransom until they "get their money". Since you're buying a home in their neighborhood... you may have to pay them. It sucks but... just do the research so you're not stuck holding the bag.

*You can invest in 2nd's that are foreclosing but there is a lot to know about it and this post does not get into that foreclosure investment strategy AT ALL*

Another potential pitfall could be IRS Liens... they should not "follow the property" but it could take some time to get the IRS to remove the lien which could hold up your "flip" sale.

You must figure an amount to pay the current occupants to entice them to leave and not destroy the home on their way out. This also brings up another good point... if at all possible, avoid properties with renters*. Many banks do this... it's called "Cash for Keys" and many Realtors have a form available to them from their local board. I'd budget $2,500 to $3,500 but certainly start your enticement at perhaps $1,000.

*The tenancy laws have recently changed and you may become a "buy and hold" investor when you didn't really want to.

Here's a hot tip: If you're finding it difficult to get someone to cooperate... rather than filing for an eviction try to sweeten the pot by adding a weekend getaway. You can usually get some kind of package for a couple hundred bucks.

When you go to the foreclosure (trustee) sale you'll want to have done all your research. You MUST know the market value for the home. It gets crazy when the bidding starts. You need to have figured all your costs and have a decided stopping point for your bidding. You'll base this on the market value minus your projected costs (and figuring a little extra for unforeseen challenges) and all this will be based on your target profit.

You Must Pay Cash (actually... cashier's checks) You have to show up with cashiers checks when you buy foreclosures at a trustee sale. It's recommended that you think of these cashiers checks as money and get different checks for different denominations. In other words... if you plan on spending $100,000, then bring a check for $50,000 a $20,000 a couple $10,000's and a couple $5,000's. This will make sure you don't have $20,000 tied up if the house you buy is only $80,000. They don't make change on the courthouse steps. You'll have to wait for the trustee to receive the paperwork and cut your check... it could be weeks.

You'll definitely want to work with a local, competent, Realtor so you can make sure you have a good assessment of the value of the home. You should definitely work with a Realtor who knows the foreclosure market. You may also want a good contractor too so you can asses you potential repairs. You've got to have a good contact at a reputable title company so you can get data on the liens that may be against the property. I personally know of a good realtor who knows Corona Real Estate, I’m a little biased but I think you’ll like the service you get by working with me… um… him.

I know I've over simplified it, at the interest of making this post easy to read, but when you buy foreclosed homes... I want you to know that you need to be ready to roll up your sleeves and work! Initially this is not easy money, but once you have a system down it will get easier.

You'll find that there's a lot of work when you buy foreclosed homes, but the upside is the profit and Joy you get when you help another family get info a nice house... one that you bought, fixed up, and on which you made a profit.

If you have any questions about this post, about foreclosure investing, investing in real estate, or want to contact me for help when you Buy Foreclosed Homes in Corona or Riverside, go to my website and contact me there.

Enjoy and Go Make Some Money!

Can I Use Financing When I Buy Foreclosed Homes?

2010-03-22T09:36:00.000-07:00

What a great great question!

Here's the answer...

"It Depends". lol

Here's the long and short of it. When you buy a foreclosed home on the open market... what I mean is not on the courthouse steps, you most certainly can get a loan. In fact, the banks want to loan you money... the real estate and lending markets drive a big chunk of our economy... so it's very advantageous for the economy as well as your bank account, to get a loan when you buy a foreclosed home. You can get an FHA loan, VA loan, or use conventional financing.

Without getting too much in depth... as an investor, you want to leverage your money as much as possible right? Let's say you have $1,000,000 to invest and the homes you're going after are worth $250,000. Well.... if you bought them all cash, you'd be out of business after 4 homes (or less because of closing fees). If you finance all of those homes, assuming 20% down, you can buy 20 homes before you're out of seed money (although most "conventional loans" will only allow you to finance up to 10 homes). Some of the taxes and interest on the homes can be written off (check with a tax professional for details) and you should be able to make a good return on your money with the rents you collect. I won't get in to numbers on this example but I did the math for myself and with all the benefits, my 4.875% interest rate was reduced 2%. Imagine being able to buy a foreclosed home for 2.875%. When you factor in the rents... you are getting the house for free... well... you're actually being paid to buy the house.

Why is that?? You are providing a service. The marketplace rewards those who provide a service.

Here's the other side of it... if you are buying a foreclosed home as your primary residence (to live in), you have just as great an advantage when you get a loan on the home. New home buyers and seasoned buyers alike have a great amount of benefits in home ownership. When you are buying a foreclosed home... now you're getting a home at wholesale and you're able to write off the interest you pay... again... bringing your total cost to finance wayyyy down (see the paragraph above).

When buying a foreclosed home at an auction at the courthouse steps... here's where the difference really comes in. This is why, at the beginning of the post, I said it depends.

Let me first clarify... I said "auction at the courthouse steps" because these sales are usually the best homes to buy. There are many auction houses that charge buyer premiums and are not selling the home at much of a discount. Often, these sales can be revoked by the seller because they did not meet their "minimum bid" which is almost never published. The type of auction I'm talking about is either called a "trustee sale" or "sheriff sale" because they are handled by a 3rd party and are literally done outside the courthouse on the steps. Some states allow those homes to be financed and some don't. Here in California... it's cash and carry. I'll explain this on another post.

When you buy a foreclosed home at the courthouse steps... your purchase is the actual foreclosure. There are some risks but if you do your homework you can really make a ton of money... or buy a great home at a drastic discount. This is the better place to buy homes especially if your plan is to "flip" them.

So.... If you have to pay cash for a house bought on the courthouse steps, how can you get financing on it? Well... you have to get the financing after you get the deed. You would own the property free and clear and then get a loan against it, which would then replenish your bank account. At which time you could do it again and again and again. You would definitely want to fix up the home before you apply for a loan.

If you're looking to buy a foreclosed home in or around Riverside, California... then you definitely need someone who specializes in that area. I specialize in Riverside, Corona, Lake Elsinore. Norco Hills, and Mira Loma. Get expert advice in these areas and let me roll out the red carpet for you, become a V.I.P. Buyer and get an edge when you Buy Corona Homes. If you want to search for repo homes in and around Riverside you can visit my site http://10BestRepos.com for Riverside Repo Homes.

What is a foreclosure or foreclosed home?

2010-03-19T18:13:00.000-07:00

When you buy a foreclosed home you are buying a home that the previous home owner was no longer able to pay for. Foreclosures happen when the borrower can or will no longer pay for the home. Common reasons for foreclosure are non payment of the loan due to:

Loss or reduction of income
Divorce
Death
Living beyond your means
Over-buying by speculators
Gigantic loss of value
Destruction of property

Most of the time a home is foreclosed on because of a traumatic event, like death or divorce. Entire families are often times displaced.

There are two types of foreclosures. "Judicial" foreclosures and "Non-Judicial" or "Trustee" foreclosures.

In a judicial foreclosure a complaint is filed with the courts and will go through an entire hearing. Judicial foreclosures are performed in 15 states. The "redemption period" can be lengthy on these types of foreclosures... and they vary from state to state. That's really the biggest thing to pay attention to when buying a home that was foreclosed on through that process.

A nonjudicial foreclosure is handled by a trustee and is usually wrapped up in a shorter amount of time. The redemption time is typically much shorter. Nonjudicial foreclosures are performed in 32 states. They are both "clean" sales... meaning all debts and liens are typically wiped out and the new owner can take ownership with a clean title. Again... the only possible snafu is the redemption period. Pay attention to that and you'll be in great shape when buying a foreclosure.

Many foreclosed homes are radically discounted and put back on the market to be re-sold to a new owner. This is where you can really clean up... when you buy a foreclosed home.

You know the old saying... someone's loss is your gain.

Where ever you are looking to buy your foreclosed or repo home, make sure you know the local market and you'll really be able to cash in. Some markets are very competitive... take a look at my video talking about buying a foreclosed home in your local area.