Learn more about Short Sales, Foreclosures and Real Estate Owned (REO) properties. As a buyer you can learn about the advantages and disadvantages to investing in “Distressed Properies”. Also I will explain some common myths and cover strategies for buying one of these property types at the best price, the best terms and with the lease amount of hassle.

Common Types of Distressed Properties

Pre-Foreclosure- When a homeowner can no longer make payments for any reason (such as medical bills, loss of a job, divorce, death in the family, or overspending), the bank notifies the homeowner that the foreclosure process will start unless payments are made. This period is known as a pre-foreclosure. During this time, the homeowner can try to refinance or pay the amount due in order to keep the home. However, if the homeowner fails to pay or work out a new agreement with the bank, the bank will foreclose on the property.

Short Sale-  Since the foreclosure process can be expensive and time-consuming, a bank may sometimes accept less than the amount owed, which is called a “short sale”. A short sale is an agreement in which your mortgage lender agrees to accept a payoff on the loan for less than the balance. Manylenders agree to a short sale because they receive more of the loan balance in comparison to the amount they would gain from selling the property following a foreclosure. This process also aids in maintaining home values in the community the property is located and helps the homeowner maintain a better level of credit compared to a foreclosure. In most instances, homeowners considering a short sale must meet specific criteria to qualify; you must be behind in your mortgage payments, provide evidence of economic hardship, and have little or no equity in the property.

A short sale is not a typical real estate transaction. Most real estate transactions involve the home seller and their real estate ant, the buyer and their lender, and their real estate agent. In a short sale situation, all of those parties in additions to the seller’s loan servicer, a housing counselor, any junior lien holders, mortgage investors, and insurers may be involved too.  

With so many parties involved in a short sale, the process can be difficult to complete without a qualified REALTOR® to help guide you and act as a liaison between all of the parties involved. You will want the advice and expertise of a REALTOR® who has your best interests in mind and will expedite the short sale transaction. It is essential to have a REALTOR® who won’t allow you to miss a detail that could delay closing the transaction in a timely manner and to the specifics required by all parties involved. A qualified REALTOR® with experience in short sales will also be able to find a buyer to complete the transaction. Homeowners agreeing to a short sale should also consult a tax expert and obtain the services of an attorney to help protect themselves from any future claims by the lender.

The Foreclosure Process- When a property is being foreclosed and sent to a sheriff sale or auction, the minimum bid usually includes all the money owed to the lender. these amounts are a total of the balance of the loan, attorney’s fees along with any other costs which have been incurred during the foreclosure process. When you bid at a sheriff sale for any properties, be prepared to have a bank check in the amount of 20% of your bid price. You also get the property in “as-is” condition. Since the amount of money that is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. This is the time that the property reverts back to the lender or the bank. It now becomes an REO or “real estate owned” property.

REO Properties-  After an unsuccessful sheriffs sale, the bank now owns the property. The loan on the property now no longer exists on record. At this time the bank will take care of things such as evicting the prior owners, winterizing the house, and usually maintaining the outside of the property.

When someone now purchases a REO, they will receive a new deed with clear title. With bank owned properties, you may inspect the house for any defects using a home inspector or contractor, at your expense.

Not all bank owned properties for sale are bargains. You must figure the renovation costs and add that number to your purchase offer. Then calculate your holding costs, financing costs , and real estate commission, and add that to your purchase and renovation costs. Then subtract that from your potential selling price. This is your profit.

Buying a foreclosure or REO is only a bargain if you buy the property at the right price. When banks sell their REO’s, they initially try to get the best price for the property that they can. It is a myth that banks just dump their properties to the first qualified bidder. Although, many times you can get it at a bargain price if you have a little know how and patience.

When you are interested in making an offer on one of these properties, you make your offer through a real estate agent. REO’s are put on the multiple listing service (MLS). In summary, not all REO’s are created equal.  If you are planning to live in the house, you can obviously pay more than an investor as you will be living in the home and you will have time on your side for the property value to increase, but you can still buy these properties below market value, fix them up and wind up with equity in the house.

Tax Properties - Tax properties occur when a property owner fails to pay property taxes. When this occurs, the county will place a tax lien on that property, equal to the amount of taxes owed. A tax lien prevents the owner from ever selling the property, To remove this tax lien, the owner must pay the back taxes owed plus interest. If the owner fails to pay the back taxes, the county can also seize the property and sell it, using the proceeds from the sale to pay the back taxes. As an investor, you can either buy a tax lien or seized property, known as a “tax sale.” If you buy a tax lien, the property owner must pay you the cost of the lien plus interest, to remove the lien from the property. If the property owner fails to do this, you can take possession of the property just for the cost of the lien alone. To raise money from seized properties, the county will hold an auction where the highest bidder gets the property, even if the bid is way under the fair market value of the property. Whether you buy a tax lend or a tax sale, you can get property for literally pennies on the dollar.

Probate Property – When someone dies, they may leave property behind in a will, which is called a “probate property.” Often the people inheriting the property live out of town and may never have seen the property. What’s more, they’d rather sell it so they can easily divide the cash among all the inheritors. As a result, probate properties are often sold below market value just to get them sold quickly.

___________________________________________________________________________________________________________________________________________________

Get A 50% Discount Off The Cover Price

 The Millionaire Real Estate Investor: Anyone Can Do It…Not Everyone Will…Will You?

Based on extensive research and interviews with over 120 millionaire real estate investors like these, Gary Keller’s “how to” guide reveals the models, strategies and fundamental truths millionaires use to become wealthy through real estate investing.

But the book isn’t just about real estate. This book also takes a hard look at the money myths that hold some people back and the money truths that lets others soar. The book begins by exploring the “MythUnderstandings” about the way people view investing. For example, Keller explains despite what most people think, investing by definition and design isn’t risky. Millionaire Real Estate Investors employ time-tested strategies to avoid risk and, in the end, take luck out of the game.