How to Find Foreclosures - Where Do I Start?
October 8, 2007 by David Cowgill
Many 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:
- 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.
- 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.
- 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.
- 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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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.
Thanks Shannon. Good idea with the zestimate comparison. Zillow.com is one of my favorite real estate sites.
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.
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.
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.
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...
Very true Tim. Most people probably assume just buying a foreclosure is easy and once that’s done they can cash out.
Thanks Jackie and nicely put analogy.
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
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!
[...] 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 [...]
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.
[...] 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 [...]
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.)
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!
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.