Real Estate

 

Foreclosure Homes Are One Of The
Hottest Sources For Discounted Properties

When it comes to foreclosure homes, questions abound!

What are foreclosure homes?

Should owner occupants buy a foreclosed home?

Should investors take chances with foreclosure homes?

Are foreclosure homes safe to buy?

How much money will I save going this route?

Lets examine each of these questions in brief.

What are foreclosure homes?
These are homes in which banks and other lenders legally repossess the properties due to the homeowners defaulting on the mortgage payments.

Once the homeowner ceases to make payments for whatever the reason, the law allows the lenders to receive remuneration through the foreclosure process.

After the lender files for foreclosure, this affords them the legal right to sell the property in order to recoup the amount owed on the mortgage by the defaulted homeowner.

Homes in this stage are classified as foreclosure homes.

Once the foreclosure process is over and the property is returned back to the lender, the property becomes a REO.

Should owner occupants buy a foreclosed home?
This question has been asked and will continue to be asked. Most people repeat this question because they are looking for someone to ease their concerns. The truth is, doing your homework and performing due diligence is the only way to quash any fears, worries or concerns.

Buying foreclosed homes takes savvy, intelligence, patience and speed. It also demands that a potential homebuyer becomes an investigator, researcher, negotiator, and even a counselor of sorts. A counselor because oftentimes defaulted homeowners will need a shoulder to cry on.

As far as owner occupants buying foreclosed homes, the answer is, “It depends!” If a potential homebuyer is willing to do the sometimes exhaustive legwork, then by all means go for it! If not, the traditional route of using a real estate agent is the best route to take.

Should investors take chances with foreclosure homes?
As with any investment, there is an element of risk; most investors and homeowners know this. How many times have you heard of homeowners in new subdivisions collectively suing builders for cracked foundations, sewage problems and HOA Homeowner Association issues? This happens everyday even with certain protections in place.

The point being, foreclosure homes offer or present no greater risks than non-foreclosure homes; at least not to investors and potential home buyers who are thorough in performing their due diligence. Foreclosure homes do present challenges, however, those challenges are worth it when it comes to the money saved.

How much money will I save going this route?
The money saved buying a foreclosed home will vary from state to state and from market to market. Generally speaking, one can expect to save at around thirty percent off of the FMV Fair Market Value of the home.

Remember, that is a general figure; it can be more or less. The actual amount really depends on a number of variables. How good of a negotiator are you? People who are great negotiators do well with foreclosed homes. What is the current status of the market in that particular area? If there are a lot of units on the market, banks and lenders are likely to be more flexible in making the deal happen.

Do you have cash in hand? When it comes to foreclosed homes; as the old saying goes, “Money talks!” And, cash buyers are king! When owner occupants and investors have cash, they get the attention of their sellers.

That’s why the market saw a proliferation of “We Buy Houses” cash buyers. These investors understood what sellers were pining for; cash! Cash can easily net you deals where you walk away saving yourself forty to sixty percent and more on the FMV Fair Market Value.

Are foreclosure homes safe to buy?
Again, this all depends on the buyer performing their due diligence. Here is a true for example of a foreclosed home that I bought a few years ago. The home that was built in 1962 and has these parameters:

  • Brick ranch with crawl space
  • 3 Bedrooms 2 Baths
  • 1530 sqft
  • On a dead end street
  • Sitting on 1.2 acres of land
  • No central air
  • Gas central heating
  • Septic tank
  • Carport

Upon further inspection this house was the largest tract in a very quiet subdivision. Although it’s not an official cul de sac, it’s pretty close because it’s on short dead end street. Houses in the area with lots averaging a quarter acre, sell for around one hundred and twenty five thousand.

Here are the variables; the septic tank has never been pumped since the house has been built. The current owner states that the plumbing does back up under certain conditions. All of the windows needed to be replaced with energy efficient double pane windows, a total of twelve windows in all. The house also needed a new roof.

The property did not have air conditioning and heating system is outdated. Consequently, the house needed a new HVAC system including new ducts. As far the electrical went, it had a up to date circuit breaker box. However, the only outlets that had proper grounding were the washer and dryer and the outlet for the refrigerator. As you can guess, all of that wiring had to be replaced.

After closer examination, my inspector noticed black mold spots in the closets and then found various mold and mildew spots throughout the house. Since the drywall was over forty-five years of age, it made sense to simply replace it rather than trying to treat the mold issue.

This meant that I would be replacing all of the drywall! Both bathrooms had mold and mildew and the tubs, sinks and fixtures needed to be replaced. The kitchen required all new cabinets, sinks and plumbing. So here is the dilemma, the owners were in arrears and owed a total of forty-seven thousand dollars. They were prepared to use bankruptcy to temporarily halt the foreclosure process.

My estimate to bring the property up to today’s standard and compete with the other available properties in that market was $36k! When I presented my cash offer to the bank,

Foreclosed Homes For Sale
Foreclosed Homes
Bank Owned Homes
Bank Owned Properties
Cheap Houses For Sale
Lease To Own Homes
REO Properties

I packaged the deal to substantiate all the defects, repairs and renovations from a respected and certified house inspector. I included pictures with verifiable cost estimates that “THEY” would pay if “THEY paid contractors to perform all of the necessary work. There was no disputing those facts.

I advised them of the homeowner’s mindset in terms of filing bankruptcy to temporarily stop the foreclosure and the costs involved. If they went that route, the bank, the homeowner and the community were going to lose.

In the end, after some hard line negotiating, the bank agreed to sell me the property as a short sale. I bought the house as is, with no termite inspection and no guarantees whatsoever and here is how the numbers panned out.

  • Bank $41,000
  • Owner $6,000
  • Fix up $25,000 materials, parts and labor
  • Real estate broker fee $3000.00, which purchaser paid
  • Sold property at wholesale price for $97,000
  • My profit after all costs $25,000

It cost me $25k to rehab the house because I deal with Foreclosed Homes For Sale all the time and have crews ready to go at a moments notice. The deal took approximately seven months from time I found out about the property my broker sold the house.

The new owners moved in, ecstatic that they had instant equity. The previous owners avoided foreclosure and bankruptcy and were able to start reestablishing themselves with the $6000.00 cash boost.

The bank got a property off of their hands that most likely would have sat on their books in the REO department for over a year or more based on the condition of the property. As you can see, foreclosure homes are worth it, if you are ready to deal with the challenges, bumps in the road and take them in stride, foreclosure homes are the way to go!

Joel Marks is a real estate investor who invests in Cheap Houses For Sale, Foreclosure Homes, REO Properties and markets properties by selling Lease To Own Homes and Owner Financing properties. He specializes in helping Americans avoid foreclosure. If you are in foreclosure or facing foreclosure, help is available. 

For more information on topics related to successful real estate investing, getting out of foreclosure, hard money loans or any other issue related to real estate investments, please visit, REODr.com

Source: http://reodr.com/

 

 


Real Estate Investors Need Property Locators and Bird Dogs. If You Would Like To Become a Property Locator or a Bird Dog Keep Reading 

REO and Broker Price Opinion