Real Estate Investing

Foreclosure and pre-foreclosure properties are often a great deal for homebuyers and a particularly profitable opportunity for investors. Now more than ever, nicer and nicer properties are being auctioned off as foreclosure rates skyrocket across all economic levels. Any homebuyer considering perusing the foreclosure offerings will want to keep on their toes and look at several sources to find the best deal.

Public Records: The county clerk or county recorder’s office keeps a record of all notices sent to homeowners during the foreclosure process. It is free to visit the office and search the public records for notices of default, Lis Pendens and notices of sale. This route may also help a person stay a step ahead of the foreclosure announcements made to the general public. It is the ideal option for anyone thinking of making a pre-foreclosure offer.

Internet: There are plenty of web sites that list foreclosure offerings. These are typically a vast national or regional database and offer free trials that allow users to determine whether the service is right for them. The information found here usually includes name, address, amount left on the loan, any additional loans outstanding and possibly a contact phone number as well.

Newspapers: Check for notices of foreclosure sales in the newspaper’s classified section. Publication of these notices is required by law.

Asset Management Companies: These companies assist banks in selling property that has been foreclosed upon. Check their web sites for more information on listings and contact details.

Government Agencies: From HUD to the U.S. Army Corps of Engineers, there are plenty of government sites listing foreclosure property and details like any plumbing or pest problems.

For a fairly comprehensive list of government listing web sites, asset management companies’ web sites, etc., click here.

The real estate market is still in limbo in most areas of the country and foreclosure rates are well above average. It may be tempting to seize the day at a real estate auction. A few things to know before you go:

1) Keep your emotion in check. It can be easy to get caught up in the excitement of an auction, or the competition of outbidding everyone else. Keep in mind, however, that this isn’t Ebay. You are playing on a whole different level. This is business and you must keep a level head. You are not necessarily going to get a tremendously discounted price. Know when to walk away.

2) Inspect the property beforehand. Try to purchase only from those auctions that allow bidders to inspect the property beforehand. This is essential. Particularly with foreclosures, there are two reasons the property might be run down. If the homeowners didn’t have the money for mortgage payments, it is doubtful they had the money for property maintenance. Worst case scenario: the homeowner is so resentful over losing their home that they allow all sorts of “accidents” to happen around the house in the final days, lowering the home’s value.

3) Research the property first. What is the neighborhood’s approximate price ceiling? Are any developments planned that could affect property values? Information is the greatest tool in controlling yourself and keeping a level head at auction.

4) Be discreet. The name of the game at auctions is to play it close to the vest. If the research or inspection phases reveal anything that drastically changes your perception of the house, use it to your advantage in the auction.

5) Get your cash together. There is usually going to be a minimum $5,000 due immediately from the winning bidder, with financing often available through select lenders. Cash is king in the auction business.

One thing to keep in mind with the current market is that auctions are no longer all about foreclosures. There may be out-of-town job transfers or homeowners who bought a new home, never imagining that their old home would stall on the market. These types of frustrated buyers are also turning to auctions as a means of unloading property quickly. Whatever the situation, real estate auctions are nothing for the savvy, educated, level-headed buyer to sneeze at.

Across America, builders are saddled with unsold inventory and are being forced to get creative. Builders are ever eager to build and lenders are ever eager to lend to whomever, wherever. After all, it is their lifeblood. It was an ominous train headed for Disasterville and it finally derailed, causing the housing market in some areas of the country to become reminiscent of the 1980’s.

Builders are coping and doing the best they can to survive. Licking their wounds, builders are turning to auctions as a means of unloading these houses. The housing market has swung so fiercely in the buyer’s favor that they can demand lower prices or incentives even if the home is auctioned, according to an article by United Press International.

The Good: Builders might not starve, or even lose any weight at all. Furthermore, investors have a golden egg just waiting to be harvested. After all, most savvy investors will tell you to buy when no one else will. A recent study shows real estate is still the top investing choice for the vast majority of self-directed investors, particularly for the purposes of renting the property out. Smart move. Our recent interview with real estate investing expert Lisa Moren Bromma reiterated this point. The current condition of the housing market dictates that real estate be held, not flipped.

The Bad: Existing homeowners neighboring the auction properties are really, really mad.

According to the San Jose Mercury News:

“In his own attempt at civil protest, homeowner Randy Brown tried to scare off investors one day by raising his garage door, pulling out his jacked-up truck painted with green flames, cranking his music and revving up his motorcycle. ‘I bought my house on August 16,’ Brown said. ‘If one of these houses goes for the minimum bid, I will have lost $155,000 in six weeks.’”

Unfortunately, Brown isn’t the only one dealing with such a scenario, though he might win points for most creative.