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 Search Foreclosures FREE For
7-Days!
Free access for 7 days, try it out! No strings, no
contracts, no hassles and you can cancel at any time. Hurry! Foreclosures
sell fast. Visit RealtyTrac.com. With virtually every Bank,
Government and Institutional property you'll find your next home waiting
for you
RealtyTrac, Inc., the leading online marketplace for foreclosure
properties, provides all the resources that home seekers, investors and
realtors need to locate, evaluate and buy properties at below market
value. Founded in 1996, RealtyTrac sets a new standard for online real
estate services by offering the largest database of pre-foreclosure and
foreclosure properties, with more than 650,000 properties across the
country, comprehensive property data, productivity tools and extensive
professional resources. RealtyTrac hosts close to 2 million unique
visitors monthly, and is the exclusive foreclosure data provider to AOL,
Home Gain, MSN House and Home, The Wall Street Journal Real Estate Journal
and Yahoo! Real Estate.
Buying a Foreclosure Property Below
Market Value: Five Tips from the Pros
House hunting can be a very
daunting experience, especially in today’s real estate market. Both
investors and home buyers have been priced out of the market by escalating
costs, and good real estate deals are increasingly difficult to find.
But there are bargains out there, for people who know where to
look.
“For people willing to do some homework, the foreclosure
market offers some of the best opportunities in real estate today,”
explains James J. Saccacio, chief executive officer at RealtyTrac, the
leading online foreclosure marketplace.
Web-based services such as
RealtyTrac give consumers access to foreclosure and pre-foreclosure
information that was previously available only to professional real estate
brokers and investors. Today, homebuyers can use these services to assist
them identify and research potential home purchases, as well as the tools
and professional resources they need to help them close the deal.
With interest rates ticking up and ARMs adjusting upward, experts
predict an increase in the number of foreclosure properties on the market.
RealtyTrac, which provides all the foreclosure data for both MSN House and
Home and Yahoo! Real Estate, has already compiled a list of over 550,000
foreclosure properties across the country.
“Foreclosure properties
can be a terrific investment, or give home buyers a much more affordable
option than traditional properties,” notes Saccacio. “But they’re not a
way to get rich quick, and a foreclosure purchase needs to be approached
in an educated, intelligent manner.”
Saccacio offers five tips to
help you close a deal on a foreclosure property:
1. Learn
about the different types of foreclosure properties, and the foreclosure
process.
There are three basic types of foreclosure
properties, representing different stages in the foreclosure process:
notice-of-default (NOD) and notice of trustee sale (NTS), which are both
pre-foreclosure properties; and real-estate-owned (REO), a foreclosure
property which has been re-purchased by the bank.
For most
consumers, buying a pre-foreclosure property from a private homeowner is
the best option. It’s important that both the buyer and the seller see the
situation as a win-win situation, in order to ensure a smooth process. In
this case, the seller is able to get out from under a mortgage without
destroying their credit rating, the lender is saved the time and expense
of foreclosing on the property, and the buyer gets a below-market price on
a home.
Foreclosure auction sales are typically the domain of the
professional investor. These properties are formally in default, and sold
to the highest bidder at an auction. Buyers are required to be physically
present at the auction, and must pay 100% of the sale price in cash, on
the spot. Though foreclosure auctions can offer significant savings, they
are not for the feint of heart or the uninformed. Unless the buyer is
already familiar with a particular property, there is usually little time
to examine it. And the buyer will be competing against professional
investors—and sometimes even the lender—at the auction.
Once the
lender officially reclaims a home, it becomes a real-estate-owned property
(REO). While REO properties typically offer more time for evaluation and a
more standard bank-managed transaction, their prices are usually very
close to full retail market value.
CHART: Stages of the
foreclosure process Stage Positive Negative Pre-foreclosure:
Notice-of-Default, Notice-of-Trustee Sale - Highest potential savings -
Potential win/win scenario benefits all parties - Chance to evaluate
property - Buyer / Seller negotiations can be difficult\ - Time pressure
to complete transaction before auction Foreclosure: Auction sale - High
potential savings - Immediate property ownership - 100% of the sale price
required in cash - No time to evaluate property - Competing with
professionals Foreclosure: Real Estate Owned (REO) - Affords significant
time to evaluate property - Traditional bank financing - Lender often
rehabs property - Lowest potential savings
2. Secure
financing early
It’s important for a buyer to be
pre-qualified before engaging in discussions with a seller. This ensures
that the buyer is in a financial position to purchase the property, and is
in the strongest possible position to negotiate. It’s best to work with a
lender who understands the foreclosure process, and can guide the buyer
through certain steps, such as ensuring that a property is FHA-compliant.
Another reason to consider pre-qualification is that not all lenders
finance foreclosure properties. Having approved financing in-hand makes
negotiations with both the seller and the lender easier, and may even make
it possible for the buyer to simply cure the default and take over the
existing loan to reduce loan processing fees.
3. Engage a real
estate agent as a “buyer’s representative”
Most people hire a real
estate agent to sell their home. These “seller’s representatives” are
charged with making the sale and negotiating the best deal for their
clients. “Buyer’s representatives” have the home buyer’s interests at
heart, and are charged with finding the right property and negotiating the
best price for their clients. Picking the right real estate agent will
make a buyer’s life much easier. There are agents who specialize in the
foreclosure market, with specific experience in REO properties. Look for
an agent with foreclosure transaction experience, as well as knowledge of
local, regional and state laws. But it’s also important to consider the
agent’s knowledge of the area; their ability to close a deal; and their
access to other professionals (attorneys, lenders, mortgage and title
professionals) to ensure that the buyer is in good hands.
4. Do your homework
Stocks offer higher
potential returns for investors than traditional savings programs, but are
also riskier. Similarly, purchasing foreclosure properties is somewhat
more risky than buying traditional real estate properties, but offer much
higher potential savings. With the right examination and due diligence,
buyers can significantly reduce the risks. It makes sense to give any
property under consideration a thorough examination. Here are eight steps
for doing a professional-level exam. CHART: Examination process steps
· Identify desirable neighborhoods – Identify specific
neighborhoods where you’d like to live or own a home. This will limit your
search to a manageable size for you and your real estate agent, and give
your a sense of relative property values.
· Cast a wide net –
There are a number of Web-based services that can put hundreds of
thousands of foreclosure properties at your fingertips. Since the best
savings are often found in pre-foreclosure properties, it’s important to
check the percentage of pre-foreclosure (vs. REO) properties in any
database before subscribing.
· Determine the property value –Look
at the original purchase price, and recent comparable property sales to
determine the current value of the property.
· Find out the amount
in default and the remaining loan balance – In order to determine a
reasonable offer price, you’ll need to know—at a minimum—how much money it
will take just to satisfy the debt to the lender.
· Run a legal investing report – Before purchasing any foreclosure
property, make sure it is free and clear of any bankruptcies, tax liens or
other financial liabilities.
· Assess the condition of the property– If at all possible, visit the
property, ask your realtor’s opinion, and review pest and structural
reports to make sure that the property is in acceptable condition, or to
determine how much of a rehab budget you’ll need to build in to your deal.
· Build a positive relationship with the seller – Before purchasing the
property, try to make sure that you’re entering into a win-win situation
with the seller, so that they’ll do what they can to make the process
easier and leave the property in good condition
· Leverage your timing – Knowing when a property is going to be
auctioned gives you an extra bargaining chip when negotiating with the
seller or the lender.
5. Make a realistic offer
Despite what you may see on late-night cable TV, investing in
foreclosure properties isn’t a sure fire “get rich quick” formula. Lenders
aren’t likely to give properties away, particularly in a real estate
market where prices continue to rise. And homeowners in financial distress
may be difficult to deal with, particularly early in the foreclosure
process. The keys to a successful foreclosure property purchase are
diligence and patience. As a rule of thumb, the best savings can be made
at the pre-foreclosure stage, where home owners can avoid a foreclosure
and lenders can save the time and cost involved in going through the
process.
Another critical point in the process is immediately prior to the
auction date, when all parties might be most open to a last-minute
solution. It’s not unusual to save from 10-30% of the market value on a
foreclosure property, and certain properties offer savings of 50% or even
more. An educated buyer—one who knows how much is owed on the property and
what its market value is—can usually come up with a realistic offer; one
that offers significant savings, while meeting the requirements of the
lender.
Now go out and familiarize yourself with the resources and tools
available to take advantage of the opportunities offered by this
formerly-hidden real estate market. With the experts pointing toward
significant growth in available foreclosure properties, there’s never been
a better time to line up your resources and get informed.
 
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