How to Find Foreclosures – Where Do I Start?

October 8, 2007 by

House ForeclosuresMany homeowners who gorged on debt during the real estate boom a few years ago are now starting to feel the squeeze. They’re struggling to keep up with their ballooning payments or, worse, losing their homes to creditors.

As the number of foreclosed properties continue to rise, new opportunities await for others. These are fast becoming ideal market conditions for a niche group of real estate investors called foreclosure gurus. They can deliver homeowners fast cash in return for their property which is inevitably sold at a nice discount. These type of foreclosure gurus used to post ads in the newspaper or staple ads to telephone poles but now there are several websites that make finding forclosures much easier.

Here are some beginner tips for those of you wondering where to start in the foreclosure market:

  1. Check out a couple of the new online services like propertyshark.com and foreclosures.com (aff). These foreclosure listing sites provide the latest foreclosures in your area and often include the amount owed and the estimated value. The amount of time you save by using these sites versus having to find foreclosures the old-fashioned way is well worth the expense if you’re serious. Both of these websites provide a free trial so you can test the site out before you commit to their paid service.
  2. Don’t even bother attending public foreclosure auctions unless you’re a pro. Despite what you may read in foreclosure books, typically these auctions are controlled by banks and other big lenders so the chances of you actually nabbing a foreclosed property are pretty slim. Instead, use an online service like the ones I mentioned above to find a property right after it goes into default. During that time there is a brief window to negotiate directly with the property owner which is your chance to get the property before it even hits a public foreclosure auction.
  3. After spotting a property online right after it goes into default, you’ll want to get in touch with the property owner or their lawyer. Your goal here is to ask the owner if there is any way to negotiate a purchase of their property before it goes into auction. Most of the time especially if you speak with the attorney, the answer is going to be a firm no. If that’s the case, it’s best to go down to the property and find the owner directly. The lawyer is less likely to cooperate because there’s usually no additional benefits for them to work out a deal before it goes into foreclosure.
  4. If the owner is willing to work out a deal then you’re in good shape and it’s time to negotiate a price and terms. If not, you might have to get creative and see if the owner is willing to become your partner. What you can do is promise to solve the owner’s immediate problem by paying enough mortgage-backed payments to get the loan out of default. In order for this to work you have to exchange for the deed to the property and potentially provide the owner with a temporary apartment if you need to refurbish their home. Then once you sell the house, you give the owner a check for a portion of the profit which typically ranges between 10 to 20%. If neither one of those strategies work, it’s probably best to move on to another foreclosed property.

These are just a few techniques to get you started in the foreclosure market. Being a newbie and dealing with a risky yet high reward investment you’ll want to be careful especially the first time. Don’t feel like you need to rush into things as the good news is forclosures are continuing to rise so there’s going to be a lot of inventory in the coming months. There will be plenty of opportunity for you to find foreclosures so don’t get frustrated if the first 5-10 properties you inquire about don’t end up the way you want it to. Keep reading articles on my blog and educate yourself so you’re comfortable before you make a move.

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26 Responses to “How to Find Foreclosures – Where Do I Start?”

  1. Shannon Lefevre on October 8th, 2007 5:43 pm

    This was great advice! I think it’s interesting to see what the prices are and then what the zestimates are…in many cases there are big differences between the two numbers in both directions.

  2. Real Estate Guru on October 8th, 2007 7:13 pm

    Thanks Shannon. Good idea with the zestimate comparison. Zillow.com is one of my favorite real estate sites.

  3. TSmith on October 9th, 2007 6:49 am

    I work for CurrentForeclosures.com a foreclosures site, and our company has been aware of the impending foreclosure issues for months. In my opinon the contributers to the failing real estate market are subprime mortgages and ARM’s that are causing homeowners that should not have qualified for a home loan in the first place to face foreclosure, the depreciation in housing prices (especially as foreclosures flood the market!) and the fact that so many are unable to sell their homes. More and more research shows that the housing market will not recover until at least next year, and it will most likely take years to get us back to where we were before the bottom fell out. The Fed interest rate cut helped some, but if they truly want to help struggling homeowners they need to make further cuts and write legislation that prevents borrowers from being taken advantage of by shady lenders.

  4. Real Estate Blog -Tim O'Keefe on October 9th, 2007 11:44 am

    I seriously think that there is a ton of money to make in foreclosures, but like all opportunities the devil is in the details, and it requires real work.

    So in the end more people by the how to course than buy the house.

  5. Jackie on October 10th, 2007 3:52 pm

    Excellent, realistic advice. Investing in foreclosures is a lot like dating: you have to kiss a lot of frogs before you find the prince. If you can’t make the deal work, move on and try another one. But keep tryinng.

  6. WIAcademy EducateBlog on October 10th, 2007 3:59 pm

    Finding Foreclosures – Where are the profitable deals?…

    Foreclosures are likely to be a popular investing strategy for at least several more years. How do you find foreclosure opportunities? Consider David Cowgill’s advice at http://www.realestateweblog.org/how-to-find-foreclosures-where-do-i-start.php#co

  7. Real Estate Guru on October 10th, 2007 11:53 pm

    Very true Tim. Most people probably assume just buying a foreclosure is easy and once that’s done they can cash out.

  8. Real Estate Guru on October 10th, 2007 11:54 pm

    Thanks Jackie and nicely put analogy. :-)

  9. Real Estate Attorney, Miami Beach on October 11th, 2007 10:57 am

    Research is very important for foreclosures. As an attorney, Realtor, and title company, I often complete property and lien searches for prospective foreclosures buyers to help them understand what title issues may be present. Some buyers do not like the expense of paying for these preliminary title and lien reviews, but is is nice to know the facts before you call the attorney.
    http://www.southptc.com/title-company-miami.html

  10. Real Estate Guru on October 18th, 2007 2:32 pm

    Yes, making sure the title is clean is a smart thing to do before going after a foreclosure. The expense is so minor compared to the amount of money it could save you if the title isn’t lien-free!

  11. When Will the Housing Market Finally Hit the Bottom? | Real Estate Investing Blog on October 29th, 2007 4:45 am

    [...] and will either have to scrounge to make the payments, or lose their home through a fire sale or foreclosure. That would throw even more supply onto a saturated [...]

  12. Mala on November 4th, 2007 5:40 pm

    Is there ANY website or court documents that allow free access to the address of homes in pre/foreclosure/bankruptcy/tax liens?? It’s a waste of time if I can’t determine the location of the property as I won’t take the time to drive out and see it if the address is not given and you have to pay for it and then get bombarded with email forever. Both of the sites you mentioned charge fees for
    information about these homes.

  13. David Cowgill on November 4th, 2007 5:43 pm

    Hi Mala-

    I don’t know of any sites that provide that information for free. I agree, if you don’t know the location of the property then it’s tough to make an offer.

  14. 7 Basic Steps To Aquire a Foreclosure Once You Find a Property - Step #1 | Real Estate Investing Blog on November 17th, 2007 3:58 am

    [...] you found a property from one of the foreclosure sites I mentioned in my previous post “How to Find Foreclosures – Where Do I Start?” or in a legal notice from your newspaper. You’re excited with the information you read [...]

  15. Chris on February 4th, 2008 3:16 pm

    Great–excellent tips. Might I also suggest to consult with an asset management company to find REOs? Although these homes may have gone through the foreclosure process, there are several benefits such as removal of liens and better financing options that may not necessarily be available beforehand. You can also go straight to a bank that deals in REOs and work directly with them. Here are some more tips on this site I hope you’ll find useful: http://investmentpropertiesinfo.com/index.html
    (Scroll all the way down to the bottom and you’ll see the Foreclosures section.)

  16. David Langham on February 27th, 2008 11:12 am

    I have had some success through our company in controlling the property through some of the methods you suggested and even more creative ones. We have had the most success, though, by finding the right REO Realtor who knows what we are looking for in a deal and giving us things we can work with. Our access to private funds to purchase and rehab the houses has been what makes things work best for us.

    If anyone in South Western Pa has connections to REO’s, foreclosures or preforeclosures and are looking to make multiple deals then we are the people to talk with!

  17. NewSunSEO on March 20th, 2008 12:37 pm

    Hello, I agree with TSmith on this one. Its all of the foreclosures that are flooding the market that make it impossible for those of us who are selling for reasons other than foreclosures to sell. Don’t get me wrong, people are still selling but for lower prices than their property is worth.

  18. Foreclosed Property on February 9th, 2009 6:31 pm

    You are so right, the government contributed to creating this crisis by not paying attention to the bad loans being made. We need to take the bull by the horns and find a way to not only fix it, but make sure it doesn’t happen again. Foreclosed Property is definitely flooding the market.

  19. Kevin Hansen on March 21st, 2009 9:37 am

    I think now is a great time to buy even though the market may keep going down for a while. I think I’ve found a way to help these banks get these forclosures(non performing assets) off of their books. Check out the asset finder program at http://www.realestatebuyerstoday.com

  20. James Mikel on October 15th, 2009 11:22 am

    Hello All, as a second generation investor I can tell you that knowledge and motion are the key. Here’s a tip for those in Florida seking to locate foreclosures or pre-foreclosures. Check the official records. All counties have a Clerk of Circuit Courts Office and most have a link from their homepage to the foreclosure listings. The listings will not include the addresses to the properties but you can easily take note of named owners and cross reference them with the Property Appraiser’s records to locate address. For locating pre foreclosure homes check the official records and query by Lis Pendens and restrict search dates to within the past 20 days. The Lis Pendens is a leading document recorded in a foreclosure filing. Almost every county has a link to the official records from the Clerk’s website. You will find many properties, if you intend to contact the owner, ignore those Lis Pendens which lists a mortgage company as Defendant (this will save you a lot of time) as this typically means there are additional unsatisfied mortgages. This will reduce your prospect list by about 80%. The great thing about learning to use and navigate the official records is that you will be able to conduct your own lien and title searches so as to know exactly how much equity an owner has before you make contact.

    If the property does have Defendants listed that are Lenders, you can query the owners named as Defendants to find if the mortgages and or encumbrances are superior or inferior to the mortgage being foreclosed.

    This is turning into a tutorial, in short Lis Pendens you can locate pre foreclosures before anyone else knows. Seek out judgments in the official records to locate properties which have met the requirements of law and are awaiting auction.

  21. vlad on November 18th, 2009 1:27 am

    Hello! I think that nowaday foreclosure is the best for invest. And here Look Here you can learn (from prominent investors ) profesional tips how to buy & sell with huge profit. Good Luck!

  22. Mikkel Garcia on April 13th, 2010 5:36 pm

    I like how you covered the short sale process. It can also be a very difficult experience, especially if there are alot of lien holders. Very worth it if you find the right deeply discounted property.

    I’ve quoted you on an article about different types of foreclosures at http://blog.home-fish.com/01-types-of-foreclosures

  23. How to Buy Foreclosures on April 28th, 2010 11:20 pm

    Good thread here… Lot’s of solid resources.

    As an all cash investor, I rarely ever look beyond the daily trustee and sheriff auction sales.

    I recently began searching for properties in AZ, more specifically Maricopa County, a place I haven’t invested in before, but want to because of such low prices and a fairly strong rental market. I managed to stumble upon a proxy bid service that offers a free foreclosed property list of real estate coming straight out of default and put on the auction block after the 90 days of notice to homeowner.

  24. Jerry Minney on June 4th, 2010 8:35 pm

    If you’re going to invest in today’s market or any market you must understand the conditions of the market you’re in. My team has found, in the current market, the best results in bank owned foreclosures. Not to say this is the only way, or the best way to make money with real estate investing today. These foreclosures usually need fix up and therefore we get them at very low prices from the bank because no one else wants them.

    I have not had good success in “short sales” or pre-foreclosures” due to what I refer to as “The Creature” or more commonly know as the Federal Reserve Bank. The reason I believe banks are not willing to short sale the notes very low before the foreclosure is because they are still leveraging those notes. Yes, banks are are enabled by their Federal Reserve Charter to count their promissory notes as cash in their accounts and go borrow more money based on how many promissory notes they keep on their accounts. When you think about this and understand it, it’s like a paradigm shift in your thinking and the light bulb comes on in your brain. If the banks make more money by borrowing against what we call a liability and they call an asset that explains a lot.

    So, when you dealing with banks and foreclosures you want to make your offer after they have leveraged the heck out of that promissory note and now want to dump what we call the asset. You can get help finding these through your local MLS or start calling on banks and develop a relationship with their REO department. When you find these and start negotiating with the banks is when you will start getting major discounts of 50%-80% off the retail values of these properties. Like any business it does require work but it can be very profitable.

    As an example, my team recently purchased an FHA foreclosure in the Denver, Colorado market for about 35% of it’s retail value because the previous investor had started the remodeling then ran out of cash. So, this was a 3 bedroom home with a brand new furnace, new wiring, new pluming and a completely redesigned interior. All we had to do was finish was was already started. We sold that property for $115,000 a few months after purchasing it in a slow market. Very nice profit on that one.

    However, if you want to succeed in this market you must have a good team, be very flexible and most importantly have “multiple exit strategies”. Know and learn these strategies such as fix and flip, fix and hold, wrap around deeds, equity sharing, lease with option to buy, etc. If you don’t know these terms then you either need to learn them or DON’T invest in real estate. Educate yourself first so you don’t wind up with a horror story of your own like the ones we have all heard of.

    Happy investing and have a blessed day!
    http://bit.ly/InvestingWithJerry

  25. Mainframe training Chennai on July 9th, 2011 7:51 am

    hi,

    Really i found some useful information…..thanks for your post..

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  26. Michael Gomez on November 5th, 2011 11:50 pm

    properties for foreclosure are now increasing and somehow, the government have something to do with it. with the dwindling economic situation, more homeowners are losing their properties and that is just too disappointing.

    please visit:
    Temecula Homes for Sale if you are interested

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