Jeremy’s take on buying a foreclosure from a distressed homeowner is typical.
“I’ve heard that’s a good opportunity to buy,” he said over a breakfast of bagels and coffee, explaining that he and his wife are trying to purchase their first home and are looking for bargains. “But I’ve also heard the process is complicated, and I’m not sure I want to deal with all the legal issues and other issues involved.”
As foreclosures proliferate and home prices stagnate in many real estate markets across the country, more investors and potential homebuyers like Jeremy, who may have been priced out of the market in recent years, are considering foreclosures as an opportunity to find bargains. And contacting distressed homeowners — who have defaulted on their mortgage payments but may be able to sell their property to avoid foreclosure — can be a good way to circumvent intimidating public foreclosure auctions, which require a higher risk tolerance and much more cash on hand.
But the prospect of contacting owners in default is enough to scare some buyers away, despite the steep discounts that are available. That’s because communicating with a distressed homeowner can be mentally, physically and emotionally draining for many buyers. They endure the hassle of tracking down the owner’s contact information and then summon the courage to actually make contact, only to have the door slammed in their face — figuratively and maybe literally.
Meanwhile the homeowner is being bombarded by letters or phone calls from the foreclosing bank and other investors, some of them showing little compassion or consideration for the homeowner’s predicament. The homeowner doesn’t relish the idea of talking to another person who promises to help out but whose sole purpose is making a quick buck.
Yet somewhere in this downward spiral of embarrassment, frustration and cynicism is an opportunity to make the best out of a difficult situation. If the prospective buyer or investor can cut through all the clutter and communicate effectively with the distressed homeowner, both parties may be able to emerge from the situation with a victory.
The following are some rules of engagement to help you communicate effectively with distressed homeowners.
Think win-win
The right approach includes viewing the purchase of a pre-foreclosure property as a win-win situation for you and the homeowner in default. Before making any attempt to contact distressed homeowners, spend some time considering how you would feel if the roles were reversed. What would you do if you defaulted on your mortgage? How would you respond if someone contacted you offering to help you avoid foreclosure by buying your home?
Such an exercise should help you realize that homeowners aren’t likely to respond favorably unless you show genuine concern for their situation and offer them an alternative that is truly better than any other option.
“Marketing should be about what you can do for that motivated seller, not about you,” said real estate investor and trainer T.J. Marrs.
Once you meet with the homeowners, be prepared to do a lot of listening, advised Southern California investor Michelle Mangione, who has been purchasing properties from distressed homeowners for more than three years. Listening to what they have to say will help you understand where the owners are coming from and how you can present an offer that helps them out.
“You can be a better negotiator just by listening,” Mangione said.
Be ready to act quickly
You’ll be wasting your time — and that of distressed homeowners — if you’re not ready to act quickly once they agree to sell. Make sure you have financing in place and the proper real estate forms on hand when you meet with the owner. You can obtain the proper forms through a local real estate agent, real estate attorney or escrow company.
Also make sure that it makes financial sense for you to purchase the property. Start by subtracting all the debt owed on the property from the estimated market value to determine how much equity you have to work with. You can research the estimated value and debt using an online foreclosure database like RealtyTrac or with the help of a local real estate agent.
Send letters first
Your first communication with owners in default should be a letter or postcard focusing on what you can do for them. It’s less confrontational than calling on the phone or knocking on the door — although you may eventually follow up with a phone call or in-person visit. Include your phone number and e-mail address on the letter.
Marrs recommends sending several letters over the course of the default period. Your letters will become increasingly effective the closer it gets to the date of the public foreclosure auction.
“One letter is pretty much useless,” Marrs said. “Three letters is about five times more effective than one letter to the same lead.”
Mangione recommends sending handwritten letters to help you stand out from all the other investors contacting the homeowner.
“I hand write every one. It’s important to me,” she said, noting that her letters are effective because they successfully get homeowners to call her back. “The owners get back to me. I just wait for a phone call.”
Use the f-word sparingly
In your initial contact with homeowners, whether by mail, by phone or in person, avoid mentioning the obvious — that they are in foreclosure. This approach helped real estate agent Adam Hunt smooth out what could have been awkward conversations with two distressed homeowners he contacted recently.
“Literally, both of them I went to their house and knocked on the door. I introduced myself. ‘I’m a real estate agent, I specialize in finding properties for my clients and helping people in foreclosure. Do you know anyone that can benefit from that?’ And of course they said ‘I can benefit from that,’” he said, noting both homeowners ended up selling to his clients.
Know state laws
Several states, including California, Illinois, Minnesota and New York, have laws and statutes that specifically govern real estate transactions involving homes in foreclosure. The primary focus of these laws is to protect homeowners in default from unscrupulous scam artists. Many of the laws require that any sales contract involving a home in foreclosure include a notice of cancellation section that gives the distressed homeowner a clear method for cancelling the sale within a certain timeframe — typically up to five business days after the contract is signed.
You should become familiar with applicable laws in your state, not only so you do nothing illegal when communicating with the homeowner, but also so you can present yourself as an above-board, ethical and knowledgeable buyer. In most cases these laws are not overly oppressive and incorporate common-sense provisions that apply to any real estate transaction.
Buyers and investors can often find excellent bargains by purchasing directly from the homeowner in default. And while communicating with homeowners in default requires persistence, careful preparation and tact, it’s certainly possible — and profitable — for anyone willing to learn the process.
On the Web:
California Civil Code 1695
New York Senate Bill 4744
Illinois Senate Bill 2349
Minnesota Statute 325N
Friday, August 29, 2008
Tuesday, August 26, 2008
Chicago-area home prices down 9.5% in June
A widely watched housing index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
Chicago prices fell 9.5 percent compared with June 2007 but rose 0.2 percent compared with May.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," David M. Blitzer, chairman of the index committee at S&P, said in a release.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
Chicago prices fell 9.5 percent compared with June 2007 but rose 0.2 percent compared with May.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," David M. Blitzer, chairman of the index committee at S&P, said in a release.
Monday, August 25, 2008
Online Real Estate Auctions: 12 Tips for First-Time Bidders
Online auctions offer both novice and experienced real estate buyers a way to obtain under-valued properties. Below are a dozen tips from Bid4Homes, a leading online auction company, to help you successfully and profitably bid online for real estate.
1. Don’t be tentative about participating in an online auction.
Today, people buy and sell a wide range of extraordinarily high-value items, from Porsches to Picassos, through online auctions. Millions of people are frequent bidders on online auctions.
Real estate is no exception. More than half a billion dollars of real estate has been sold through our online auction site, bid4assets.com. Most online real estate auction sites are easy to use and give you the information you need to assess the true value of the item. Once you try shopping for real estate on an online auction, you’ll know why it has become a widely accepted way to find great deals on property.
2. Get to know the auction site’s process and policies.
Every auction site operates its auctions differently. Be sure to understand the auction process and site policies in detail for the site you are using. The process and site policies are usually clearly outlined in the “Terms of Service” agreement. There are often differences. For example, real estate bids are a binding contract on some sites. On other sites they are not binding. On some sites, auctions have a set end time that won’t be moved. On other sites, like Bid4Homes, the auction continues until no bids are placed for five minutes so the bidder is assured of submitting their “best and final” price.
3. Clearly understand what is being auctioned.
This seems basic, but while most properties and real estate auctions are straight- forward, they can come in several forms that may not be easily understood by potential buyers. For example, is the property a condo or a timeshare? Real estate can fall into several categories of deeds (warranty, quitclaim, etc.) Is the property for sale outright or are you bidding on a down payment (called a “bid and assume” sale)? “Bid and assume” auctions require payment installments to the seller in addition to the bid amount; and the winning bidder does not obtain the title until the outstanding balance is paid in full.
4. Get to know the seller.
Find out as much about the seller as possible. If the auction site allows buyers to rate a seller or provide feedback, review the information thoroughly. Buyer feedback provides insight into the person/company selling the property and may reveal potential problems. It is advisable to be particularly thorough with all research if a seller profile has feedback from a few buyers. If feedback is sparse, consider checking the Better Business Bureau (www.bbb.org) or Federal Trade Commission (www.ftc.gov) if the seller is an institution.
If you are concerned about whether or not the seller owns the property, it is acceptable to ask the seller to send an electronic copy of the property deed.
Always provide feedback on a seller after your transaction is finished.
5. Ensure your ability to bid and close the deal.
Buying real estate requires significant financial resources. Even if you do not have cash on hand to cover your bid, you still may be able purchase real estate through online auctions. Identify a source of money well in advance of the start of bidding. This may include getting pre-approved for financing. Be familiar with the seller’s payment terms to ensure that you have the cash in-hand, when it is required, to pay for the property should you become the winning bidder.
Some auctions require a deposit in order to bid. You’ll find the deposit amount listed in the auction. Usually this deposit can be placed in several ways. Some methods require more time (many sites require only “certified funds”). Be sure you have the cash to make a deposit and, if you are transferring money, allow the requisite time for the transfer to occur.
6. Consider the settlement requirements, including payment options.
Payment arrangements for property bought through an online auction are made between the buyer and the seller. The auction services company is generally not involved in this transaction.
Be sure you identify all the payment requirements and fees that the seller is charging. A seller can charge a fee for services like title search, transfer or closing. There may even be a “buyer’s premium”. Specifics on such fees should be listed within the auction description.
Be wary of sellers who require payment by a wire service like Western Union or MoneyGram. These services provide no process to dispute the transaction in the event that the seller misrepresents the property. Payment methods like ACH (e.g., electronic deductions from a checking account), personal checks and PayPal provide buyers with a process to dispute charges and therefore offer some level of protection.
Note that on some sites the transaction is a binding contract so long as the property listing is accurate. If you have concerns about the settlement requirements or believe you may not be able to meet them, contact the seller prior to bidding to ask about alternative arrangements.
7. Research prices of comparable properties online.
Many factors influence what a buyer is wiling to pay when it comes to real estate. The estimated price of comparable properties located near the listed property is one factor in assessing the worth of a property. Look at the sale price of properties nearby that have sold recently. Be sure to evaluate the sales price and estimated value of similar properties that are in the same zip code, if not within a few blocks of the property under consideration. Adjust your estimates based on factors like the number of bedrooms, bathrooms, lot size, square feet of living space, recent renovation, landscaping and overall condition.
Online newspaper classifieds and real estate broker sites can be a source of listed prices for nearby comparable properties. For example, a site like RealtyTrac, with almost 1 million listings, can be a valuable source of current, local information. Any online properties listed on RealtyTrac are paired with a list of up to 15 comparables displayed on a map, along with a link to check local properties listed on the Multiple Listing Service.
8. Research the neighborhood, including amenities, infrastructure and nearby features that may add or detract from the property.
Most real estate buyers know how important location is to establishing the value of a property. The evaluation of a property’s location is up to individual buyers based on the distance to places that are important to them.
Consider the proximity of the property to features like mass transit, highways, business centers, shopping, schools, or recreational areas. Look for the location, for example, of landfills, industrial parks, airports or quarries.
Google Maps and RealtyTrac.com can give you aerial views of most neighborhoods in the U.S. The address of the property you are considering and important landmarks can be easily queried, located and labeled on this local map.
Google Maps can also give you street level views of many neighborhoods, as if you were standing in the street
The U.S. Department of Housing and Urban Development is a source for information about real estate developments, both those that have been completed and those that are planned. Search engines can also provide a means to research the neighborhood and town where the property is located.
9. Be rigorous about due diligence. Eliminate the chance of “surprises”.
Many auction listings provide a summary of due diligence findings. Be sure to thoroughly review all the information provided in the listing and confirm claims whenever possible.
Counties generally retain important information on special circumstances associated with real properties, including tax rates, zoning designations and details on any liens or back taxes on properties. It may require some legwork to get the information, but it is worth the effort. Online auction properties listed on RealtyTrac include loan information and previous sale information to help your research.
Find out if the property is part of a homeowners association or covered by a community covenant. If it is, there could be recurring expenses or community restrictions. You should be particularly aware of restrictions if you intend to do extensive renovations. Do not hesitate to ask the seller to give you details, to clarify information or confirm your findings.
10. Visit the property and arrange for professional property evaluation
You may decide to limit your activity to properties in your area when starting out with online auctions, It may sound like common sense, but it’s always a good idea to visit a property in person; however,that may not be possible for properties auctioned over the Internet. If the interior is not accessible, it will be valuable to drive by the property and view the exterior and the yard.
Alternatively you can hire an inspector or appraiser to evaluate the property for you. Plan ahead. Access to the property can often be a challenge given schedules, location of the property, seller and buyer, etc. Many properties for sale through online auctions may have limited hours for inspecting the property. Arrangements to inspect the property should be made with the seller prior to bidding on the auction.
Here is a source for locating a home inspector or appraiser: American Society of Home Inspectors (www.ashi.org) and American Society of Appraisers (www.apprasiers.org).
11. Determine the maximum amount you are willing to pay for the
property after considering all factors and all anticipated expenses.
Determining the highest price you are willing to bid is an important part of the process. Identify this price and don’t bid higher than your limit. In other words, don’t let your emotions control your bidding and be willing to move on to the next property if you are outbid.
12. Bid with confidence.
You have done your homework, developed a bidding plan and now you are ready to bid.
Some auctions allow you to bid in two ways. A “flat bid” means that you place bids manually. You must place a bid each time you are outbid. An “auto bid” is the maximum bid you're willing to bid on the auction. The auction site will automatically increase your bid to maintain your high bid position or to meet the reserve price. Your bid will be increased only as others bid against you. Your “auto bid” is held confidentially in the system.
Remember to carefully read the Terms of Service one last time before you bid.
Then bid with confidence and have fun. Enjoy the exhilaration that comes with online bidding and buying real estate.
1. Don’t be tentative about participating in an online auction.
Today, people buy and sell a wide range of extraordinarily high-value items, from Porsches to Picassos, through online auctions. Millions of people are frequent bidders on online auctions.
Real estate is no exception. More than half a billion dollars of real estate has been sold through our online auction site, bid4assets.com. Most online real estate auction sites are easy to use and give you the information you need to assess the true value of the item. Once you try shopping for real estate on an online auction, you’ll know why it has become a widely accepted way to find great deals on property.
2. Get to know the auction site’s process and policies.
Every auction site operates its auctions differently. Be sure to understand the auction process and site policies in detail for the site you are using. The process and site policies are usually clearly outlined in the “Terms of Service” agreement. There are often differences. For example, real estate bids are a binding contract on some sites. On other sites they are not binding. On some sites, auctions have a set end time that won’t be moved. On other sites, like Bid4Homes, the auction continues until no bids are placed for five minutes so the bidder is assured of submitting their “best and final” price.
3. Clearly understand what is being auctioned.
This seems basic, but while most properties and real estate auctions are straight- forward, they can come in several forms that may not be easily understood by potential buyers. For example, is the property a condo or a timeshare? Real estate can fall into several categories of deeds (warranty, quitclaim, etc.) Is the property for sale outright or are you bidding on a down payment (called a “bid and assume” sale)? “Bid and assume” auctions require payment installments to the seller in addition to the bid amount; and the winning bidder does not obtain the title until the outstanding balance is paid in full.
4. Get to know the seller.
Find out as much about the seller as possible. If the auction site allows buyers to rate a seller or provide feedback, review the information thoroughly. Buyer feedback provides insight into the person/company selling the property and may reveal potential problems. It is advisable to be particularly thorough with all research if a seller profile has feedback from a few buyers. If feedback is sparse, consider checking the Better Business Bureau (www.bbb.org) or Federal Trade Commission (www.ftc.gov) if the seller is an institution.
If you are concerned about whether or not the seller owns the property, it is acceptable to ask the seller to send an electronic copy of the property deed.
Always provide feedback on a seller after your transaction is finished.
5. Ensure your ability to bid and close the deal.
Buying real estate requires significant financial resources. Even if you do not have cash on hand to cover your bid, you still may be able purchase real estate through online auctions. Identify a source of money well in advance of the start of bidding. This may include getting pre-approved for financing. Be familiar with the seller’s payment terms to ensure that you have the cash in-hand, when it is required, to pay for the property should you become the winning bidder.
Some auctions require a deposit in order to bid. You’ll find the deposit amount listed in the auction. Usually this deposit can be placed in several ways. Some methods require more time (many sites require only “certified funds”). Be sure you have the cash to make a deposit and, if you are transferring money, allow the requisite time for the transfer to occur.
6. Consider the settlement requirements, including payment options.
Payment arrangements for property bought through an online auction are made between the buyer and the seller. The auction services company is generally not involved in this transaction.
Be sure you identify all the payment requirements and fees that the seller is charging. A seller can charge a fee for services like title search, transfer or closing. There may even be a “buyer’s premium”. Specifics on such fees should be listed within the auction description.
Be wary of sellers who require payment by a wire service like Western Union or MoneyGram. These services provide no process to dispute the transaction in the event that the seller misrepresents the property. Payment methods like ACH (e.g., electronic deductions from a checking account), personal checks and PayPal provide buyers with a process to dispute charges and therefore offer some level of protection.
Note that on some sites the transaction is a binding contract so long as the property listing is accurate. If you have concerns about the settlement requirements or believe you may not be able to meet them, contact the seller prior to bidding to ask about alternative arrangements.
7. Research prices of comparable properties online.
Many factors influence what a buyer is wiling to pay when it comes to real estate. The estimated price of comparable properties located near the listed property is one factor in assessing the worth of a property. Look at the sale price of properties nearby that have sold recently. Be sure to evaluate the sales price and estimated value of similar properties that are in the same zip code, if not within a few blocks of the property under consideration. Adjust your estimates based on factors like the number of bedrooms, bathrooms, lot size, square feet of living space, recent renovation, landscaping and overall condition.
Online newspaper classifieds and real estate broker sites can be a source of listed prices for nearby comparable properties. For example, a site like RealtyTrac, with almost 1 million listings, can be a valuable source of current, local information. Any online properties listed on RealtyTrac are paired with a list of up to 15 comparables displayed on a map, along with a link to check local properties listed on the Multiple Listing Service.
8. Research the neighborhood, including amenities, infrastructure and nearby features that may add or detract from the property.
Most real estate buyers know how important location is to establishing the value of a property. The evaluation of a property’s location is up to individual buyers based on the distance to places that are important to them.
Consider the proximity of the property to features like mass transit, highways, business centers, shopping, schools, or recreational areas. Look for the location, for example, of landfills, industrial parks, airports or quarries.
Google Maps and RealtyTrac.com can give you aerial views of most neighborhoods in the U.S. The address of the property you are considering and important landmarks can be easily queried, located and labeled on this local map.
Google Maps can also give you street level views of many neighborhoods, as if you were standing in the street
The U.S. Department of Housing and Urban Development is a source for information about real estate developments, both those that have been completed and those that are planned. Search engines can also provide a means to research the neighborhood and town where the property is located.
9. Be rigorous about due diligence. Eliminate the chance of “surprises”.
Many auction listings provide a summary of due diligence findings. Be sure to thoroughly review all the information provided in the listing and confirm claims whenever possible.
Counties generally retain important information on special circumstances associated with real properties, including tax rates, zoning designations and details on any liens or back taxes on properties. It may require some legwork to get the information, but it is worth the effort. Online auction properties listed on RealtyTrac include loan information and previous sale information to help your research.
Find out if the property is part of a homeowners association or covered by a community covenant. If it is, there could be recurring expenses or community restrictions. You should be particularly aware of restrictions if you intend to do extensive renovations. Do not hesitate to ask the seller to give you details, to clarify information or confirm your findings.
10. Visit the property and arrange for professional property evaluation
You may decide to limit your activity to properties in your area when starting out with online auctions, It may sound like common sense, but it’s always a good idea to visit a property in person; however,that may not be possible for properties auctioned over the Internet. If the interior is not accessible, it will be valuable to drive by the property and view the exterior and the yard.
Alternatively you can hire an inspector or appraiser to evaluate the property for you. Plan ahead. Access to the property can often be a challenge given schedules, location of the property, seller and buyer, etc. Many properties for sale through online auctions may have limited hours for inspecting the property. Arrangements to inspect the property should be made with the seller prior to bidding on the auction.
Here is a source for locating a home inspector or appraiser: American Society of Home Inspectors (www.ashi.org) and American Society of Appraisers (www.apprasiers.org).
11. Determine the maximum amount you are willing to pay for the
property after considering all factors and all anticipated expenses.
Determining the highest price you are willing to bid is an important part of the process. Identify this price and don’t bid higher than your limit. In other words, don’t let your emotions control your bidding and be willing to move on to the next property if you are outbid.
12. Bid with confidence.
You have done your homework, developed a bidding plan and now you are ready to bid.
Some auctions allow you to bid in two ways. A “flat bid” means that you place bids manually. You must place a bid each time you are outbid. An “auto bid” is the maximum bid you're willing to bid on the auction. The auction site will automatically increase your bid to maintain your high bid position or to meet the reserve price. Your bid will be increased only as others bid against you. Your “auto bid” is held confidentially in the system.
Remember to carefully read the Terms of Service one last time before you bid.
Then bid with confidence and have fun. Enjoy the exhilaration that comes with online bidding and buying real estate.
Saturday, August 23, 2008
Capitalizing on a Cooling Market
When the South Florida housing market entered into a nosedive last year, Harry Andrade saw an opportunity. While other investors were trying to quickly jettison flipper properties, Andrade took a totally different tack — looking for bargains on investment properties that could generate a positive cash flow.
“It’s a much better strategy simply because it’s a buyer’s market today and not a seller’s market,” he said.
About 90 days later Andrade had purchased his first foreclosure property 20 percent below market value and secured a tenant whose rental payments more than covered his monthly carrying costs for the property.
“It felt great. … I made about $1,500 an hour on this one,” he said, noting that he’s already found another property that looks like it could be turn into a similar deal.
The Miami native began his search for properties by signing up for RealtyTrac to help him find homeowners in foreclosure who were motivated to sell and still had some equity to work with in their homes. Although he had never purchased a foreclosure before, he said he has been involved in real estate since he was 18 and recognized that foreclosures represented a good opportunity to buy below-market real estate — especially in a slumping market.
“When things are bad, times are good for some people,” Andrade said. “It all depends on how you look at it.”
Andrade was careful to point out that he approaches foreclosure investing as a way to help owners who are in distress — and that type of approach is crucial to his success.
“Because it’s people in need and you can help them out in return, for a profit. So rather than them losing everything, help them make something,” he said, noting that investors are not successful when they ignore the needs of the homeowner. “If you go out and try to help others first, just make it a win-win for everyone, I think you’ll be fine.”
The property that Andrade purchased is a condominium. Although he was not originally planning to purchase a condo, he noticed the property had about $70,000 in equity — based on the value and debt data provided on RealtyTrac. That convinced him to take a look at the property, which in turn convinced him to try to make contact with the homeowner to see if he could work out a mutually beneficial deal.
He started by sending a letter to the homeowner. The homeowner contacted him in response to the letter and they set up an in-person meeting.
“I met with her and we discussed what we were doing,” he said. “We just talked about getting her into a better situation than what she was currently in.”
Once he and the owner came to an agreement about purchasing the property, Andrade enlisted the help of a local real estate broker to complete all the proper paperwork and close the deal. Within a month of purchasing the property he found a tenant.
Andrade continued to search RealtyTrac for more foreclosures that he can turn into rentals and in the process found that there were more people looking to sell than he was able to help by himself.
“I am getting about 50 to 60 calls per month. I have a feeling that the calls will increase to over 100 very soon,” he said. “I really enjoy the business of helping people get out of a tough situation and into a better one.”
Andrade started sending some of the leads to a local broker, allowing him to help more distressed homeowners while also making a commission off the leads closed by the broker.
“Business in this category has picked up so much that I expect to earn over $20,000 per month in commissions,” he said. “In addition, I plan to buy four additional foreclosures properties in 2008 through the help of RealtyTrac. Sellers are dumping properties for pennies on the dollar.”
There are plenty of opportunities to grab and plenty more to come,” he continued. “There’s a lot of money to be made in this business. A lot. And all it takes is the first step, which is getting the proper information and taking action.”
“It’s a much better strategy simply because it’s a buyer’s market today and not a seller’s market,” he said.
About 90 days later Andrade had purchased his first foreclosure property 20 percent below market value and secured a tenant whose rental payments more than covered his monthly carrying costs for the property.
“It felt great. … I made about $1,500 an hour on this one,” he said, noting that he’s already found another property that looks like it could be turn into a similar deal.
The Miami native began his search for properties by signing up for RealtyTrac to help him find homeowners in foreclosure who were motivated to sell and still had some equity to work with in their homes. Although he had never purchased a foreclosure before, he said he has been involved in real estate since he was 18 and recognized that foreclosures represented a good opportunity to buy below-market real estate — especially in a slumping market.
“When things are bad, times are good for some people,” Andrade said. “It all depends on how you look at it.”
Andrade was careful to point out that he approaches foreclosure investing as a way to help owners who are in distress — and that type of approach is crucial to his success.
“Because it’s people in need and you can help them out in return, for a profit. So rather than them losing everything, help them make something,” he said, noting that investors are not successful when they ignore the needs of the homeowner. “If you go out and try to help others first, just make it a win-win for everyone, I think you’ll be fine.”
The property that Andrade purchased is a condominium. Although he was not originally planning to purchase a condo, he noticed the property had about $70,000 in equity — based on the value and debt data provided on RealtyTrac. That convinced him to take a look at the property, which in turn convinced him to try to make contact with the homeowner to see if he could work out a mutually beneficial deal.
He started by sending a letter to the homeowner. The homeowner contacted him in response to the letter and they set up an in-person meeting.
“I met with her and we discussed what we were doing,” he said. “We just talked about getting her into a better situation than what she was currently in.”
Once he and the owner came to an agreement about purchasing the property, Andrade enlisted the help of a local real estate broker to complete all the proper paperwork and close the deal. Within a month of purchasing the property he found a tenant.
Andrade continued to search RealtyTrac for more foreclosures that he can turn into rentals and in the process found that there were more people looking to sell than he was able to help by himself.
“I am getting about 50 to 60 calls per month. I have a feeling that the calls will increase to over 100 very soon,” he said. “I really enjoy the business of helping people get out of a tough situation and into a better one.”
Andrade started sending some of the leads to a local broker, allowing him to help more distressed homeowners while also making a commission off the leads closed by the broker.
“Business in this category has picked up so much that I expect to earn over $20,000 per month in commissions,” he said. “In addition, I plan to buy four additional foreclosures properties in 2008 through the help of RealtyTrac. Sellers are dumping properties for pennies on the dollar.”
There are plenty of opportunities to grab and plenty more to come,” he continued. “There’s a lot of money to be made in this business. A lot. And all it takes is the first step, which is getting the proper information and taking action.”
Tuesday, August 19, 2008
Secrets of Pre-Foreclosure Investing
One pre-foreclosure expert says a new federal law will change everything, and short sales and short payoff sales will become the new trend in the marketplace.
Another claims that developing a series of “systems” in your business is the key to success.
A third warns that accurate data and timely information is essential to survive.
All agree on one thing: The pre-foreclosure market is a highly specialized area of the foreclosure business that is not for amateurs.
“Most people in foreclosure today have zero equity in their homes,” said Thomas J. Lucier, a Tampa Bay real estate investor and author of The Pre-Foreclosure Property Investor’s Kit. “That’s why the passage of the new debt relief act is going to change everything. It’s going to make short sales more appealing to investors.”
On December 18, Congress passed new legislation to eliminate taxes on mortgage debt. The legislation was signed into law by President Bush on Dec. 20 and will provide a temporary, three-year change to the tax code to eliminate any taxes homeowners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt. The change in the tax law will cap untaxable forgiven debt at $2 million and apply only to principal residences.
Lucier said that the Mortgage Forgiveness Debt Relief Act (H.R. 3648) removes the tax burden on mortgage indebtedness, encourages loan restructuring between lenders and homeowners, and discourages foreclosures.
Bob McManus, author of Say Yes to Wealth: Build Wealth Through Foreclosures, believes the key to successful pre-foreclosure investing is developing “a series of systems” that are used again and again in the business. He uses the Internet, scripts, form letters, call sheets, check lists, direct mail campaigns, objection handling techniques and other “systems” that help him locate, track, negotiate, purchase and sell pre-foreclosures.
Cash-to-walk
“The first deal I put together was a cash-to-walk deal in Hawthorne,” said McManus, co-owner of Dream Big, an El Segundo, Calif., real estate training company. “The homeowner was getting ready to move out. When I showed up at the door, they were packing. The auction was scheduled a few weeks down the road. I offered the owner a couple thousand dollars to walk. They deeded the property over to me. Then, after five days, I hired a local agent, listed the property, flipped it and made $31,400.”
McManus said the borrower got out of a painful situation, the bank got rid of a non-performing asset, and McManus bought a discounted house for pennies on the dollar.
“Sometimes, we do equity sharing deals, where we bring the defaulting homeowner current and then sell the property and split the profit with the owner 50/50,” added McManus. “Other times, we do lease-option deals, where the seller sells the house to you (the investor) and you lease it back to the seller.”
Frequently, folks in foreclosure are often angry, anxious and in denial. Many times, says Randy Siems, a Missouri pre-foreclosure investor who made over $1 million in pre-foreclosure equity deals last year, the person answering the door isn’t aware that they are in foreclosure because their spouse hasn’t told them.
“I once put together a deal where the wife didn’t tell the husband that they were in foreclosure,” said Siems, who engineered the deal at the couple’s kitchen table. “I had to break the bad news to the husband when he got home from work. It was a horrible scene.”
Siems said there are many opportunities for pre-foreclosure investors. Nationwide, millions of strapped homeowners – many of them in default or about to enter default – are desperate to sell their homes before the bank repossesses their property.
In November, a total of 201,950 foreclosure filings were reported nationwide, according to RealtyTrac. Not all will end up confiscated by banks; many distressed homes will end up in the hands of budding pre-foreclosure investors like McManus, Siems and others.
Buying pre-foreclosures has two main advantages over buying at the auction or purchasing bank-owned properties, according to Siems. First, a homeowner facing foreclosure may be motivated and willing to do almost anything to avoid losing property to the bank. Secondly, investors can inspect the property before purchasing it.
Office on wheels
Siems said that pre-foreclosure investors should be prepared to spend a lot of time in their vehicles conducting drive-by visual inspections, door-knocking and driving to appointments with distressed homeowners. The front seat of Siem’s vehicle doubles as a sort of “office on wheels.” When he’s out door-knocking, Siems carries a suitcase filled with a laptop computer, lists of deep-equity pre-foreclosure prospects, maps, a portable printer – along with all the real estate contracts, disclosures and forms needed to close the deal at the owner’s kitchen table. He also uses a special filtering software he developed to target the best deals.
“I’m only interested in deep-equity deals,” said Siems, noting that he only pursues pre-foreclosures with 60 percent equity or higher. “After my mailing campaign narrows down my prospects to a handful of pre-foreclosures owners, I pre-qualify them on the telephone and then go visit them in person a couple of days before the auction.”
Rob Geritano, a pre-foreclosure investor from St. Louis, Mo., who occasionally works on pre-foreclosures deals with Siems, believes the key to success in the pre-foreclosure market is having accurate information.
“Having accurate data and a software system that filters out the best properties is very important,” said Geritano. “Instead of knocking on 20 doors, you want to zero in on one or two properties that you know are good deals in good neighborhoods.”
His software, he claims, separates upside- down deals from equity-rich properties.
“On one deal, I knocked on a door of a homeowner who had a small mortgage, but there was a balloon payment due on a private money lender,” said Geritano. “We paid off the balloon, took title to the property for $20,000, and then we brought in some wholesale investors, who purchased it for $28,000. Within an hour, we had made $8,000.”
Buyer beware.
While investing in pre-foreclosures is appealing and profitable for many investors, there is a downside. Most residential properties in pre-foreclosure – especially in bubble states like California, Florida and Nevada – are not worth pursuing because the defaulting homeowners have drained the equity out of their homes. Moreover, pre-foreclosure investors need to investigate hidden liens, unpaid federal and local taxes and other undisclosed title problems.
“If you miss a lien or a second mortgage, you might acquire a property over-encumbered and in debt,” warned McManus, the book author and pre-foreclosure trainer. “You’re asking for trouble when that happens.”
Lucier, the Tampa Bay real estate investor and author, says the secret to being a profitable pre-foreclosure investor is “specialized knowledge.”
“In this business, you cannot afford to rely on the expertise and advice of so-called real estate professionals such as real estate agents and title escrow agents who may or may not know what they are doing,” says Lucier, a 24-year veteran of investing in pre-foreclosures. “When buying a pre-foreclosure property, you can have a myriad of problems that must be solved quickly before the property’s loan is foreclosed on and sold at public auction.”
In his book, Lucier asserts that investors need to study the local foreclosure laws and regulations in their state. In California, for example, sellers in foreclosure are protected by both the California Home Equity Sales Contact Act (California Civil Code Sections 1695-1695.17), which was enacted in 1979, and the California Mortgage Foreclosure Consultants Act (California Civil Code Sections 2945-2945.11).
One of the most notable contractual provisions of the California law is that the seller, among other things, has a five-day right to cancel the purchase agreement.
And real estate agents in California face formidable challenges with pre-foreclosure deals.
For example, when buyers of a property in foreclosure are investors (who will not live in the property) and the property is a one-to-four unit property – one of which is owner-occupied – the real estate licensee representing an investor must be bonded for twice the value of the property. The catch: Bonds for that amount aren’t available, so a real estate licensee cannot represent an investor-buyer, only the seller.
If the contract and the sale are not done according to the law, the seller has the right to rescind the sale and could, long after the sale, sue to have the sale reversed. There are extreme penalties for violating the law. In California, violators of the home equity sales law can face serious consequences. Equity purchasers who violate the law may be convicted of a crime punishable by one-year imprisonment, plus a $25,000 fine, for each violation.
“The most important element of the pre-foreclosure business is the information you gather and what you do with it,” explained Geritano, the investor and data provider from St. Louis. “Stick to what you know best. Let the title people do their job. Let the data people provide you with the data. Let your team help you through the process.”
Adds Lucier: “The key to success is due diligence. You’ve got to be on the ground and know the value of homes in your market. This business is not for amateurs. Moreover, you’ve got to be careful. We are in uncharted waters. I’ve never seen it so bad.”
Another claims that developing a series of “systems” in your business is the key to success.
A third warns that accurate data and timely information is essential to survive.
All agree on one thing: The pre-foreclosure market is a highly specialized area of the foreclosure business that is not for amateurs.
“Most people in foreclosure today have zero equity in their homes,” said Thomas J. Lucier, a Tampa Bay real estate investor and author of The Pre-Foreclosure Property Investor’s Kit. “That’s why the passage of the new debt relief act is going to change everything. It’s going to make short sales more appealing to investors.”
On December 18, Congress passed new legislation to eliminate taxes on mortgage debt. The legislation was signed into law by President Bush on Dec. 20 and will provide a temporary, three-year change to the tax code to eliminate any taxes homeowners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt. The change in the tax law will cap untaxable forgiven debt at $2 million and apply only to principal residences.
Lucier said that the Mortgage Forgiveness Debt Relief Act (H.R. 3648) removes the tax burden on mortgage indebtedness, encourages loan restructuring between lenders and homeowners, and discourages foreclosures.
Bob McManus, author of Say Yes to Wealth: Build Wealth Through Foreclosures, believes the key to successful pre-foreclosure investing is developing “a series of systems” that are used again and again in the business. He uses the Internet, scripts, form letters, call sheets, check lists, direct mail campaigns, objection handling techniques and other “systems” that help him locate, track, negotiate, purchase and sell pre-foreclosures.
Cash-to-walk
“The first deal I put together was a cash-to-walk deal in Hawthorne,” said McManus, co-owner of Dream Big, an El Segundo, Calif., real estate training company. “The homeowner was getting ready to move out. When I showed up at the door, they were packing. The auction was scheduled a few weeks down the road. I offered the owner a couple thousand dollars to walk. They deeded the property over to me. Then, after five days, I hired a local agent, listed the property, flipped it and made $31,400.”
McManus said the borrower got out of a painful situation, the bank got rid of a non-performing asset, and McManus bought a discounted house for pennies on the dollar.
“Sometimes, we do equity sharing deals, where we bring the defaulting homeowner current and then sell the property and split the profit with the owner 50/50,” added McManus. “Other times, we do lease-option deals, where the seller sells the house to you (the investor) and you lease it back to the seller.”
Frequently, folks in foreclosure are often angry, anxious and in denial. Many times, says Randy Siems, a Missouri pre-foreclosure investor who made over $1 million in pre-foreclosure equity deals last year, the person answering the door isn’t aware that they are in foreclosure because their spouse hasn’t told them.
“I once put together a deal where the wife didn’t tell the husband that they were in foreclosure,” said Siems, who engineered the deal at the couple’s kitchen table. “I had to break the bad news to the husband when he got home from work. It was a horrible scene.”
Siems said there are many opportunities for pre-foreclosure investors. Nationwide, millions of strapped homeowners – many of them in default or about to enter default – are desperate to sell their homes before the bank repossesses their property.
In November, a total of 201,950 foreclosure filings were reported nationwide, according to RealtyTrac. Not all will end up confiscated by banks; many distressed homes will end up in the hands of budding pre-foreclosure investors like McManus, Siems and others.
Buying pre-foreclosures has two main advantages over buying at the auction or purchasing bank-owned properties, according to Siems. First, a homeowner facing foreclosure may be motivated and willing to do almost anything to avoid losing property to the bank. Secondly, investors can inspect the property before purchasing it.
Office on wheels
Siems said that pre-foreclosure investors should be prepared to spend a lot of time in their vehicles conducting drive-by visual inspections, door-knocking and driving to appointments with distressed homeowners. The front seat of Siem’s vehicle doubles as a sort of “office on wheels.” When he’s out door-knocking, Siems carries a suitcase filled with a laptop computer, lists of deep-equity pre-foreclosure prospects, maps, a portable printer – along with all the real estate contracts, disclosures and forms needed to close the deal at the owner’s kitchen table. He also uses a special filtering software he developed to target the best deals.
“I’m only interested in deep-equity deals,” said Siems, noting that he only pursues pre-foreclosures with 60 percent equity or higher. “After my mailing campaign narrows down my prospects to a handful of pre-foreclosures owners, I pre-qualify them on the telephone and then go visit them in person a couple of days before the auction.”
Rob Geritano, a pre-foreclosure investor from St. Louis, Mo., who occasionally works on pre-foreclosures deals with Siems, believes the key to success in the pre-foreclosure market is having accurate information.
“Having accurate data and a software system that filters out the best properties is very important,” said Geritano. “Instead of knocking on 20 doors, you want to zero in on one or two properties that you know are good deals in good neighborhoods.”
His software, he claims, separates upside- down deals from equity-rich properties.
“On one deal, I knocked on a door of a homeowner who had a small mortgage, but there was a balloon payment due on a private money lender,” said Geritano. “We paid off the balloon, took title to the property for $20,000, and then we brought in some wholesale investors, who purchased it for $28,000. Within an hour, we had made $8,000.”
Buyer beware.
While investing in pre-foreclosures is appealing and profitable for many investors, there is a downside. Most residential properties in pre-foreclosure – especially in bubble states like California, Florida and Nevada – are not worth pursuing because the defaulting homeowners have drained the equity out of their homes. Moreover, pre-foreclosure investors need to investigate hidden liens, unpaid federal and local taxes and other undisclosed title problems.
“If you miss a lien or a second mortgage, you might acquire a property over-encumbered and in debt,” warned McManus, the book author and pre-foreclosure trainer. “You’re asking for trouble when that happens.”
Lucier, the Tampa Bay real estate investor and author, says the secret to being a profitable pre-foreclosure investor is “specialized knowledge.”
“In this business, you cannot afford to rely on the expertise and advice of so-called real estate professionals such as real estate agents and title escrow agents who may or may not know what they are doing,” says Lucier, a 24-year veteran of investing in pre-foreclosures. “When buying a pre-foreclosure property, you can have a myriad of problems that must be solved quickly before the property’s loan is foreclosed on and sold at public auction.”
In his book, Lucier asserts that investors need to study the local foreclosure laws and regulations in their state. In California, for example, sellers in foreclosure are protected by both the California Home Equity Sales Contact Act (California Civil Code Sections 1695-1695.17), which was enacted in 1979, and the California Mortgage Foreclosure Consultants Act (California Civil Code Sections 2945-2945.11).
One of the most notable contractual provisions of the California law is that the seller, among other things, has a five-day right to cancel the purchase agreement.
And real estate agents in California face formidable challenges with pre-foreclosure deals.
For example, when buyers of a property in foreclosure are investors (who will not live in the property) and the property is a one-to-four unit property – one of which is owner-occupied – the real estate licensee representing an investor must be bonded for twice the value of the property. The catch: Bonds for that amount aren’t available, so a real estate licensee cannot represent an investor-buyer, only the seller.
If the contract and the sale are not done according to the law, the seller has the right to rescind the sale and could, long after the sale, sue to have the sale reversed. There are extreme penalties for violating the law. In California, violators of the home equity sales law can face serious consequences. Equity purchasers who violate the law may be convicted of a crime punishable by one-year imprisonment, plus a $25,000 fine, for each violation.
“The most important element of the pre-foreclosure business is the information you gather and what you do with it,” explained Geritano, the investor and data provider from St. Louis. “Stick to what you know best. Let the title people do their job. Let the data people provide you with the data. Let your team help you through the process.”
Adds Lucier: “The key to success is due diligence. You’ve got to be on the ground and know the value of homes in your market. This business is not for amateurs. Moreover, you’ve got to be careful. We are in uncharted waters. I’ve never seen it so bad.”
Monday, August 18, 2008
US foreclosure figures 'jump by 50%'
Foreclosure filings in the American market have increased by over 50 per cent in the last year, according to latest nationwide figures.
Research from RealtyTrac shows that 272,000 US households received notice of foreclosure last month - up from 175,000 in July 2007.
A total of 77,000 homes were repossessed over the month, with filings increasing in 42 out of 50 states.
Nevada, California, Florida, Arizona, Ohio, Georgia and Michigan were all identified as hotspots by RealtyTrac.
Rick Sharga, a vice president at the firm, said: "[Foreclosures] could start to stabilize as early as the first quarter of next year if the government program gains any traction.
"That's really the unknowable right now."
Irvine, California-based RealtyTrac also indicated that it currently had around three quarters of a million foreclosed homes on its books.
Chief executive James Saccacio added: "[This] number…represents approximately 17 per cent of the inventory of existing homes for sale reported in June by the National Association of Realtors."
Research from RealtyTrac shows that 272,000 US households received notice of foreclosure last month - up from 175,000 in July 2007.
A total of 77,000 homes were repossessed over the month, with filings increasing in 42 out of 50 states.
Nevada, California, Florida, Arizona, Ohio, Georgia and Michigan were all identified as hotspots by RealtyTrac.
Rick Sharga, a vice president at the firm, said: "[Foreclosures] could start to stabilize as early as the first quarter of next year if the government program gains any traction.
"That's really the unknowable right now."
Irvine, California-based RealtyTrac also indicated that it currently had around three quarters of a million foreclosed homes on its books.
Chief executive James Saccacio added: "[This] number…represents approximately 17 per cent of the inventory of existing homes for sale reported in June by the National Association of Realtors."
Sunday, August 10, 2008
How to buy a foreclosed home
Hoping to score a house on the cheap by buying a foreclosed property? There are good deals out there, but the process is complicated and risky. Here's what you need to know.There are certainly plenty of foreclosed homes on the market. In California, 40% of existing homes sold in the second quarter were foreclosures, according to DataQuick, a provider of real estate information, compared with 5.4% a year earlier.
Indeed, Fannie Mae CEO Daniel Mudd said Friday that the company is pushing hard to sell more foreclosed properties, to get them off the books. "I don't think this is a time to be holding onto REOs and hoping for a better day," he said.
Steve Dexter, author of "Prospering in the Rising Wave of Foreclosures," has bought dozens of foreclosed homes and thinks now is a good time to dive in. "It's the best way to buy, and it's time to buy again," said
There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.
Pre-foreclosure
A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off.
Buyers can find pre-foreclosures by poring over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.
Armed with prospects, buyers should go scouting. If they see homes they like, they should contact the owners to see if they want to sell.
"You call them or knock on their doors and say, 'I know you're having a problem and I think I can help you,' " said Alexis McGee, co-founder of Foreclosures.com.
McGee only buys when she figures she can make a profit of 30% or more; marketing and other expenses wipe out about half that by the time she resells. But people buying a house to live in might be happy with a 20% discount from market value.
Cold calling and making low-ball offers on people's homes can be difficult: Some owners are emotional, even angry. Many are trying to hold onto their houses and don't appreciate what they consider scavengers sniffing around.
"But you're not taking advantage of these homeowners," said Duane LeGate, president of HouseBuyerNetwork.com, which puts together buyers and sellers of distressed properties. "All many of them want is financial relief from bad mortgages, and you're offering it."
Indeed, some owners are open to doing what's called a short sale, which is when a buyer pays less for a house than the mortgage that is owed on it. Lenders must agree to a short sale, and will then forgive the rest of the debt.
Often, banks are reluctant to do such deals, since it requires them to take a loss. It can take months and a lot of badgering before a deal goes through, and not every buyer is up for that kind of hassle.
But as the housing market deteriorates, lenders are warming up to short sales, according to Foreclosure.com founder Brad Geisen. "It makes a lot more financial sense for them to liquidate early rather than go through the foreclosure process," he said, which can cost lenders about $50,000.
Gabe Cera recently bought one through an associate of LeGate, Raul Pineyro, owner of Cacophony Group Real Estate Services in Dade County, Fla. Cera purchased a four-bed, three-bath in Miami for about $60,000 less than what the owner's mortgage was worth.
"I'm very satisfied," Cera said. "The transaction was very smooth and quick and I think I saved a lot of money."
In buying any pre-foreclosure, LeGate advises buyers to not be turned off by dirty carpets or ugly paint jobs. That's where the best deals are.
"Anybody can go the Home Depot (HD, Fortune 500) and buy some paint and a new rug," he said.
Sheriffs' sales
In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.
Bidders can't inspect the property, so there's no telling how much work it needs. And there is also no telling what kind of liens there are against the home, due to unpaid taxes and so forth, which can also jack up the cost of these homes. Finally, Buyers need to come with cash, ready to put 10%-20% down on the spot, and able to pony up the rest in a matter of days.
"If you want to buy on the courthouse steps," said LeGate, "you'd better be a pro."
Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.
LeGate himself has bought several homes at auction, with mixed results.
"The first time, I bought, renovated and sold the house all within 29 days and made a killing," he said. "I thought I was a mini-Donald Trump. The second time, the previous owner poured cement into the pipes before he left and when I turned on the water, it clogged everything. I lost more on the second house than I made on the first."
Post-foreclosure
After a lender takes back a house, the property goes back on the market as what's called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.
Author Steve Dexter advises house hunters to go to the Web sites of all the major lenders and look for REOs in their communities. Alternatively, "Get a young, hungry real estate agent who's screening REOs all the time and put them to work for you," he said. Foreclosures for sale may also be found on the sites of Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), as well as eBay (EBAY, Fortune 500).
Dexter prefers to buy REOs because the process is so clean; the title is clear and the property is delivered vacant, even if the prices aren't as good. He says one bank manager told him he usually sells REOs for 95% of listing prices, on average.
"You might not think that's too great for buyers," said Dexter, "but the listing prices are lower [than market value]," usually by 10% or more. The total discounts often exceed 15%.
Another way to buy an REO is through an REO auction. As bank portfolios of these properties have swollen, they've started to unload them en masse. Pam McKissick, chief operating officer of Williams & Williams, an auction company based in Tulsa, said her company buys big portfolios of post-foreclosure properties from lenders and then auctions them to individual buyers.
The REOs that Williams & Williams pick up are usually sold within 30 days; successful bids can be quite low. "It's a very rapid process," said McKissick, " You want to put a family back into a home quickly and bring the neighborhood back. This does that."
Saturday, August 2, 2008
Costa Rica vacation homes hit by crisis
The U.S. mortgage crisis has hit Costa Rica's once booming vacation home market, with sales plummeting as Americans who dream of buying a tropical getaway struggle to find financing.
U.S. retirees and vacationers often pay for beach homes along Costa Rica's jungle-fringed beaches by taking out mortgages on their homes in the United States, but trouble in the banking sector has made that more difficult, realtors say.
Prices for some vacation houses and condominiums in the Central American country have dropped as much as 40 percent from their peak a few years ago and sales have slumped at least 30 percent over the past six months, they say.
Real estate agent Sabastian Pecher said sales are particularly slow for less expensive condos in the $100,000 to $200,000 range, which typically have two bedrooms and are within strolling distance to a beach.
"On the lower end we're down at least 50 percent to 60 percent," said Pecher, who sells second-hand homes as well as new condominiums.
U.S. retirees and vacationers often pay for beach homes along Costa Rica's jungle-fringed beaches by taking out mortgages on their homes in the United States, but trouble in the banking sector has made that more difficult, realtors say.
Prices for some vacation houses and condominiums in the Central American country have dropped as much as 40 percent from their peak a few years ago and sales have slumped at least 30 percent over the past six months, they say.
Real estate agent Sabastian Pecher said sales are particularly slow for less expensive condos in the $100,000 to $200,000 range, which typically have two bedrooms and are within strolling distance to a beach.
"On the lower end we're down at least 50 percent to 60 percent," said Pecher, who sells second-hand homes as well as new condominiums.
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