Foreclosure Investing
How To Really Make Big Money From Foreclosure Investing.
With unemployment at a all time high and the current flood of foreclosed homes on the market, it’s no wonder foreclosure investing is one of the best ways to make big money
There are plenty of distressed houses on the market that are ripe for foreclosure investing with plenty more on their way. Foreclosure investing opportunities will remain one of the best ways to make money for several years to come. It’s all about having the right buying and exit strategy.
Before you discover the best options for foreclosure investing, learning this information on the foreclosure process is imperative. This is something most people fail to do.
There are two types of foreclosures depending where you’re doing your foreclose investing.
1. Judicial Foreclosures
Non-judicial foreclosures are settled without court intervention. The foreclosure process is set by the individual state in this case. Once the home owners loan goes into default, the mortgage lender will mail a default letter.
At the same time, a few states will record a Notice of Default around the same time with the courts. The home owner has the opportunity to bring their mortgage current. If the mortgage holder does not bring their loan current, a Notice of Sale will be mailed to the homeowner.
At this point noticed is posted in public places, recorded at the county recorder’s office, and published in area legal publications. The mortgage lender must wait for the required time as required by state law. Once this time period has ended, a public auction is held.
The highest bidder will become the owner of the foreclosed property. Most auctions of non-judicial foreclosures require cash at the end of the sale or very shortly thereafter.
It’s important for you to understand each non-judicial foreclosure state uses different systems and rules. A few states don’t require a Notice of Default, but start with a Notice of Sale. Some states require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required. You need to know the specific procedure for your state.
2. Non-Judicial Foreclosures
A judicial foreclosure is processed through the courts., Once the home owner misses their first payment the lender sends the loan to the collections department.
The banks collections department contacts the borrower and attempts to collect the missed mortgage payment. Once the home owner falls 90 days behind on their mortgage the file is sent to an attorney to start the foreclosure process.
The lender will file a complaint with the court and what is known as a notice of Lis Pendens. The lawsuit will include the total debit and the reason why the court should proceed with the foreclosure.
At this time the loan will go to the lenders Loss Mitigation Department in the Bank. The mortgage holder is then served notice of the complaint.
Normally this is done through mailing, direct service or publication of notice. The homeowner will have the opportunity to be heard before the court. If the courts determine the debt is valid, and in default, they’ll issue a judgment for the total amount owed.
This amount also includes the cost of the entire foreclosure process. Once the judgment is entered, a writ will be issued by the court authorizing a sheriff’s sale. The sheriff’s sale is an auction, open to anyone, and is held in a public place. Sometimes this can be on the court house steps or in the front yard of the property being sold in the auction.
Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale. You’ll want to double check the laws in your state to be sure. You don’t want to show up at the auction
Like most auctions, the highest bid wins the property and becomes the property owner after the court confirms the sale.
Once this is done, a sheriff’s deed is created and sent to the high bidder. Once this deed has been recorded when that deed is recorded, the highest bidder is able to purchase the property and takes ownership of the property
Below Are Some Reasons Home Owners Default On Their Mortgages:
- Increase in expense or decreased income
- Adjustable ARM resetting
- Cant’ sell their home
- Can’t refinance their existing mortgage
- Job Loss
- Divorce
- Illness
- Taxes and insurance increase
- High credit card debt and unsecured loans
- Living above their means
Where To Find Foreclosure Investing Deals:
Foreclosure Auctions
Auctions perhaps offer the biggest discounts for those interested in foreclosure investing. However they also come with the biggest risks. They demand plenty of liquid cash on hand to buy and provide extremely limited time to inspect. Only foreclosure investing veterans with years of experience or those with money they can afford to lose should consider it.
Bank Owned REOs
The issues with buying bank owned REOs have been clearly highlighted in the news over the last few months. Those interested in foreclosure investing will be best advised to find a professional to help them negotiate these deals and must be extremely careful about the condition of these properties and getting clear title.
Short Sales
Short sales are an excellent choice of property for foreclosure investing. They can provide discounts anywhere between 30-70% below market value, are often in much better condition than other foreclosure investing options and are much safer when it comes to title and ownership. When dealing with short sales you’re actually working with “preforeclosures.” This means the house has not actually gone through the final foreclosure process of auctioning off the house. Still, it is essential to have a professional on your side in order to negotiate with the lender and navigate all of the paperwork.
Wholesalers & Real Estate Agents
Wholesalers and real estate agents can be a great source of foreclosure investing deals. You may have trouble finding a foreclosure listing but an agent or wholesaler will be able to help you. Instead of having to spend money marketing and search around for new foreclosure investing deals yourself these sources of foreclosure investing deals can provide you with a steady stream of properties so that you can be doing deals daily, while seeing higher returns and closing on homes much faster than your competitors.
Buying foreclosure investing deals right is crucial. However this still doesn’t guarantee your success unless you have a solid exit strategy.
Building up a number of rental properties can provide both income right now as well as future equity growth. Just bear in mind that you will either need to commit a good portion of your time to managing these properties yourself or hire a property management company to do it for you.
If properties are in run down condition or they have been stripped by previous owners you can get involved in rehabbing and quickly add value and sell them at retail prices. You may consider selling these homes on a rent to own basis or with owner financing in order to get the maximum price and be able to move them quickly so that you can get on to other foreclosure investing deals.
The good news is that with new home building on the rise, and most foreclosure investing deals available far below what it costs to build new today the profit potential is huge. These
However you may find the biggest and fastest foreclosure investing profits from flipping homes to other investors. This is especially true when it comes to luxury homes.
Some of those involved in foreclosure investing who focus on low end properties may be lucky to make a couple thousand per deal, while buying a million dollar home at half price obviously leaves a lot of profit on the table for everyone.
Imagine acquiring a short sale or foreclosure for $500,000 that is worth $1 million. Then you could easily sell this property for $600,000, $750,000 or more to another investor who can still make a profit or to a retail buyer who wants to completely renovate it.
If it sounds like this type of foreclosure investing may be for you then don’t be afraid to think outside the box when you are looking for buyers either. There are many upcoming celebrities who are trying to be wiser with their money, but need to have a nice home for looks. Or what about offering fractional ownership deals?
The bottom line is you can become successful with all the opportunities there are the foreclosure business. The trends remain very strong.
There are massive profits to be made from foreclosure investing right now.
You just need to find a solid source for the best short sale and foreclosure properties and go in with a well thought out exit strategies in mind.
