Archive for Foreclosure 'Short–Sales'

Fixing Up Foreclosed Homes

February 5, 2009 at 3:55 pm · Filed under Foreclosure 'Short–Sales', Foreclosure Problem, Foreclosure Property

If you are ready to get into the foreclosure home investing circuit, you might be interested to know that all it takes is a little capital and some elbow grease to turn a profit. In many cases this means that you will need to fix up the foreclosed homes that you buy before you can rent them out or resell them. Many people buy foreclosed homes with the preconceived notion that they will be able to simply get rid of them right away; this can happen, but it is not the norm. Be ready to rent out the property and that means being ready to be a landlord and all the responsibilities that come with it.



A foreclosed home is typically run down and in a state of disrepair, but you can bring it back to like new if you put in enough money and effort. The reason that the owner did not keep the house up was because he or she did not have any money. Think about it, if they did not have money to pay for the mortgage, how were they going to be able to afford repairs on the home.



Before you buy foreclosed homes this is something that you will need to take into consideration. If you find a property that you like you will want to make sure that you assess the repairs before you buy the home. Remember, every bit of money that you put into the home is going to cut into your profits in the end. By assessing these details before you buy, you will be able to make an accurate guess as to how much money you will be making as a profit.



It is hard to say how much work the foreclosed homes you are considering will require. In some cases you may be able to get away with a simple repair job or two; and in other cases you may have to totally overhaul the home in order to resell it. It depends on the property, and the amount of damages it sustained in the past; obviously, this is not the same on any two foreclosed homes.



Foreclosed homes are not something that you should invest in just to invest in something. There are far less expensive investments you could be making such as the stock market. You may find one home that does not need a thing done to it, just to turn around and find another that needs a complete overhaul. In order to avoid any complications when it comes to repairs, your best bet is to assess the property thoroughly before purchasing it. Rest assured that many foreclosure property investors fail because they end up having to pour way too much money into the home and thus making a loss on the resell of the home.

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The Basics of Foreclosure “Short–Sales”

January 31, 2009 at 8:06 am · Filed under Foreclosure 'Short–Sales' ·Tagged , , ,

You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay” or “short sale.”

Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department”. More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.

From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process – attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.

The lender will want some information about the property, the borrower and the deal he has made with you. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or “BPO”). You can also submit your own appraisal or comparable sales information. In addition you will want to offer as much specific negative information about the property as possible. Also, include some relevant information about the neighborhood and the local economy if things are bad (copies of newspaper articles with “bad news” may help). A contract’s bid for repair estimates should also be submitted, which, of course, should be the highest bid you can obtain!

The lender will also ask for financial information about the borrower. Sort of a backwards loan application, the borrower must prove that he is broke and unable to afford the payments. The borrower must show that he has no other source of income or assets to repay the loan. This process may involve as much, if not more paperwork than an original mortgage application! The borrower should submit a “hardship letter”, which is basically a sob story about how much financial trouble the borrower is in. This may require a little literary creativity, and some help on your part. Don’t lie, just paint a picture that doesn’t look good.

Finally, the lender generally wants to see a written contract between you and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash” to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, which can be difficult, since many title and escrow companies simple won’t prepare one in advance of closing. You can prepare your own HUD-1, and simply write “preliminary” on the top.

Don’t be surprised if your first short sale bid is rejected. Lenders aren’t emotionally attached to their properties, so they aren’t as likely to give you steal. Many short sales fall through if the BPO comes in too high, which is often the case. You can’t pull the wool over a lender’s eyes – if the property isn’t is need of serious repair, it is unlikely you can convince the lender the property is worth a whole lot less than the appraised value.

The process of the short sale is not that complicated, but the success or failure of the deal depends upon how you present it to the lender.  Many novice investors and realtors give up at short sales quickly because their first deal is rejected.  Like any business, short sales takes practice to get good.  Generally speaking, loss mitigators are pretty good at spotting an amateur investor.  If you know what you are doing, the loss mitigators are more likely to make a deal with you.

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Buy Home – Foreclosure Houses

November 28, 2008 at 12:48 pm · Filed under Buy a Property?, Buying Real Estate, Buying an Appartment, Foreclosure 'Short–Sales', Foreclosure Problem, Foreclosure Property, buy sell home ·Tagged , ,

Many people are flocking to the foreclosure home market. In it, you are able to buy homes that are quite inexpensive, fix them up, and sell them for a profit or use them for yourself. There are a few good reasons that foreclosure houses are great for people that are looking for their first property. It is much easier to get one of these homes mortgaged than any other home.

The price is the big drawing feature of these homes. Be on the lookout for foreclosed homes in your area. You can save thousands of dollars by purchasing foreclosure houses instead of more traditional properties. There is a good chance that you will find more than one home in your area that is discounted up to half of the actual market value.

In addition to the great price that you can get up front on foreclosure houses, they are also great investment properties. If you buy a foreclosed home as your first property, and pay it off in 15 or 30 years, you will have made quite the profit. When you go to resell the house you will be able to sell it for thousands more than what you paid for it initially. And all you have to do to take advantage of this profit is simply live in your house, and make the payments.

Foreclosure houses are also good properties to look into because there is a large selection available all over the country. Regardless of where you live, you will never have any problem finding foreclosure houses in your area. This means that when you are picking out your first home that you will not be restricted in the least bit. All you have to do is locate the foreclosure houses in your area, and then go through all of them to decide that one best suits your needs.

Dont discount foreclosed homes just because they may be real fixer-uppers. If you make sure the home will suit your needs, who cares if its not the palace you invisioned? Your first home hardly ever is your last home. Chances are that if you are buying your first home that you have other things to purchase as well. This can really free up a lot of cash and let you buy more appliances and other things of that nature that you need.

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