Our strategy has been to purchase only occupied properties. This has worked out great! This particular one was able to have a tenant move in within 3 weeks!

-Richard

P.S. – This video was shot over 6 weeks ago. Don’t bother calling!

Did you know homeowners do not always have to go through foreclosure when problems arise?

Many investors and individual home owners around the country are now working with Realtors to learn how to do short sales. A Short Sale is simply a way to prevent a home from going through foreclosure. When lenders and banks are distressed due to rising numbers of foreclosures, they invariably become open to taking alternatives to foreclosures. Banks are in the business of selling money. They do not want to own houses they repo’d due to foreclosure.  So it is in their best interest to allow more short sales to clear their books.

According to Wikipedia, a  short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the homeowner.  Let me simplify this for you: You can’t pay the current mortgage, so you sell the house for less than the current mortgage amount to just get out from under it. The banks lose the original amount, but at least they get cash.

Generally, the mortgage company’s loss mitigation or “workout” department handles this transaction. And often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are other costs banks incur that are associated with a foreclosure.  This is a good option if you are having current troubles with a home mortgage, or you wish to purchase a distressed home from someone who is on the verge of foreclosure. (The rich get richer, right?)

If you are a real estate professional or investor, there are five main steps to a short sale, according to Stacy Spickes, co-owner of Texas-based America’s Home Rescue.

They are:

1. Determine the type of loan the homeowner has. Is it FHA, VA or conventional?

2. Provide the current mortgage lender what they require to make a decision. Usually, one of those requirements is a short sale or hardship package, which is simply documentation that proves the hardship of the seller.

3. You also need to know what the current mortgage lender will net in the transaction. In a short sale, the lender will take a loss and will also pay the commissions and closing costs on behalf of the buyer. If this is not acceptable by the mortgage lender, they will deny the package.

4. Know the terms the banks will and will not approve in the buyer’s purchase offer. Understand that banks will not take a huge loss so you can walk away with large amounts of cash in your pocket, 100% equity in the home or large gains through a quick flip. You as the buyer must demonstrate a fair and equitable outcome.

5. Establish an alliance with loss mitigation representatives at the banks that will get the short sale approved and closed. Always be polite and try to get to know the reps in these loss mitigation departments. If they know you personally, your chances of approval go up dramatically. Be warned, this step may take some significant amount of time to complete.

Good Luck and I wish you success!

-Paul

www.TheFlipBoard.com

1. Select a Pre-Foreclosure for Default Notices or Lis Pendens.
2. Select a Auction for Trustee Sales or Sheriff’s Sales.
3. Select a Bank Owned or Government Owned for REOs (repossessions).

See Step 4 in this guide for more about the different property statuses.

You may also look for other search criteria, such as price range and number of bedrooms and bathrooms. I recommend that you leave all those other criteria at “no minimum” to “no maximum” when you first search to get the best results. Also it is recommended you don’t change the Recording Date Range when you first search. This will give you a more comprehensive list.
Property Details
The Property Details information should always include the address of the property and the name of the owner, trustee or lender involved with the foreclosure, depending on the property status. Also included should be an estimate of the unpaid loan balance, which will appear either as the Balance, Opening Bid or First Loan Amount. The Estimated Property Market Values provided are based on comparable sales.

The Trans Date and Trans Value represent the date and purchase amount the last time the property changed ownership.

The Balance or Opening Bid provides a good estimate of the amount owed on the loan in foreclosure. The Default Amount (usually only relevant for Pre-Foreclosure properties) is the amount the owner/borrower is behind on payments. The Recorded date is the date when the document with the foreclosure information was recorded with county records.
 
STEP 2. Get Financing
Finding financing is critical to investing in foreclosure properties. Few sellers will consider you to be a serious buyer unless you have your finances in order. That means buyers need to be pre-qualified before engaging in discussions with a seller. Sellers want to make sure that a buyer is in strong financial position to purchase the property. So secure financing early. Work with a lender who understands the foreclosure process, and can guide you through certain steps, such as ensuring that a property is FHA-compliant. Not all lenders finance foreclosure properties, so you may have to shop around for a lender who does. This is yet another reason why pre-qualification early on is a good idea.

Obtaining financing not only gives you an estimate of what you can afford, it also enables you to move quickly once you locate a property that interests you. When you approach a borrower/owner or a foreclosing lender about a property, secured financing will demonstrate that you are a serious buyer and are ready to buy quickly.

Determining How Much You Can Afford Figuring out how much you can afford to spend doesn’t have to be difficult. Basically, how much you can afford is dictated by the amount of cash you have on hand plus the amount a lender is willing to loan you. There are two rules of thumb to keep in mind in this area. First, you can afford a home that is up to 2.5 times your annual gross income. Second, your monthly principal and interest payments should equal one-fourth of your gross pay, or one-third of your take-home pay.

Of course, this is dependent on your lender’s approval and your own comfort level. From the lender’s standpoint, your credit rating, income and related factors will determine how large a mortgage you can support. You will need to take a few more factors into consideration to establish your own comfort level with the mortgage amount. For example, if you are young and upwardly mobile, you may feel more comfortable stretching to afford a bigger home, knowing that eventually your increasing income will make the payments easier. On the other hand, if you’re older or plan on retiring soon, you may want a lower mortgage payment that won’t tie up as much of your income.

You can apply for financing with The FlipBoard’s financing partners. The application is free. Subscribers can click on the Get Financing tab on the home page or click on the Lending Tree banner links on any page. You will be able to apply online or by phone.

We will discuss vehicles for Real estate investors , such as hard-money loans, with more in-depth training knowledge at a later time.

 
STEP 3. Contact an Agent
If you’re a first-time homebuyer and you’ve never purchased a home, let alone a foreclosure property, it is beneficial to contact a local real estate agent who can guide you through the process of buying a foreclosure. If you work with an agent, make sure they know your priorities. Ask any potential agents if they have experience with foreclosures. Especially for first-time buyers, a good agent can be a comforting and helpful resource.

STEP 4. Contact Owner
Depending on the property status, the seller will be the owner in default, the trustee or the foreclosing lender.

Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20 percent to 40 percent below market value.

If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

If the lender or government agency takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender usually sells the property to recover the unpaid loan amount. The lender typically clears the title for any buyer, but the potential bargain is often less than a pre-foreclosure or auction property.

 
Contact Owner: Pre-Foreclosure
Buying property in the pre-foreclosure process – the period between receiving a Notice of Default from the lender and the day the lender puts the property up for an auction -typically offers investors and homebuyers the best bargains, but it is also the most difficult stage to purchase a distressed home. During this stage, buyers need to deal directly with the owner of the house, who may or may not know that their home is being foreclosed. Homeowners in foreclosure are also under a lot of stress, making it difficult to negotiate a mutually beneficial deal. Moreover, there may be very little time to complete a transaction, so buyers need to be very careful during the pre-foreclosure period and also be very knowledgeable of how to navigate the foreclosure process.

When a property is in pre-foreclosure (NOD, LIS), the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. The pre-foreclosure period can last several months, so you may need to be patient when trying to contact the owner in default.

If you haven’t done it already, you’ll want to evaluate the property’s value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment.

If the trustee confirms the property is still in foreclosure, and you believe the property could be a wise investment, you should contact the owner in default as soon as possible. The quickest way to make contact with the owner is to send a postcard to the owner. You can choose pre-written wording for the postcard or type your own wording. There are many sources on the Internet for this verbiage.

If the owner does not respond to a postcard you can try to send another postcard (the owner may have a change of heart as the end of the pre-foreclosure period approaches) or you can wait to see if the property is scheduled for auction and attend the auction. One option is to call the owner if you can track down the phone number. Another option is to go to the property and try to contact the owner in person, as long as you recognize the ownership rights of the owner. We don’t recommend either of these options if you don’t have previous experience.

 
Contact Trustee: Auctions
One of the most challenging stages of buying foreclosures is buying foreclosures at the courthouse steps. First of all, you are competing with seasoned investors who track the auctions daily. Secondly, you will likely have to pay cash for the property because financing an auctioned property isn’t possible in many states. And if there is a money encumbrance attached to the property – a tax lien, a mechanics lien or a second or third mortgage – you, as the new owner, will have to pay it off in full. These are a few of the reasons why the auction is the most risky way to buy foreclosures.

Before the auction, you may have a chance to work out a last-minute deal with the owner in default. Usually a property is scheduled for auction just a few weeks before the auction occurs, so you may have to move quickly if you want to contact the owner.

Auctions can be postponed or canceled anytime, so no matter what the auction date is (even if it’s in the past) it’s always a good idea to contact the trustee or attorney to confirm. I recommend you call when you first locate the property and the day before the property is scheduled for auction. The trustee/attorney has the most up-to-date information if the auction has been canceled or postponed. The trustee/attorney cannot answer other questions about the property.

If you believe the property could be a wise investment, you can attend the auction to bid on the property. The auction date, time, location and opening bid are of public record and be acquired relatively easy. If any of this information is missing, you can often get it from the trustee or attorney. If you’ve never bought at auction before, then you should attend several auctions just to observe before you attend an auction to bid.

Contact Owner: Bank Owned
If the property is Bank Owned (REO), your first step is to contact the lender, whose information is usually on RealtyTrac’s Property Details page. You should contact the lender directly and ask for their REO or asset management department to find out how you can view and possibly make an offer on the property. REO means “Real Estate Owned” by the lender. It’s another way to say the property has gone through the foreclosure process and has now been repossessed by the foreclosing lender.

If you have trouble finding a phone number or address for the lender/bank through the Internet or otherwise, you can contact the local property assessor to find out the owner’s name and mailing address. Since the property is bank owned, the property assessor should have the bank or lender listed as the owner. Go to statelocalgov.net to find the local property assessor in your area.

 
Contact Owner: Government Owned
Many homebuyers get government-guaranteed financing. When homes that were bought with loans guaranteed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) go into foreclosure, they are repossessed by the government and then put up for sale by brokers that work for the government. Buyers who are interested in purchasing government-owned foreclosures need to use government-registered brokers to write the purchase agreement.

Many government-owned properties are already listed with a real estate agent, and you should see a link to contact that agent in the Contact section of the property details page. If the listing agent’s information is not available, you can contact a local agent at any large realtor. Or you can try to contact the government agency listed directly.

 
STEP 5. Make an Offer
If you have never purchased a foreclosure property before, I recommend that you have a real estate agent help you prepare and make an offer.

To get an estimate of the potential bargain for any property, you need to find out the estimated market value of the property, how much is owed on the property and if the owner has any other loans or liens encumbering the property.

Add together any outstanding loans and liens and estimated repair costs and subtract that total from the estimated market value of the property.

Based on your research of the potential bargain, you can make an offer. Usually the offer amount is somewhere below the market value but above the total outstanding liens and estimated repair costs. If the property is a pre-foreclosure or bank owned, you could prepare an offer similar to a typical purchase offer, contingent on a full inspection and title search.

If the property is selling at auction, you will need to make your offer, or bid, at the auction. In many states, bidders are required to pay in cash in the form of a cashier’s check at the auction. You probably won’t be able to conduct a full inspection and title search when you buy at an auction, so it’s important to do careful research before attending an auction.

According to our friends at the IRS (laughing as I type this), the mortgage holder has no further rights beyond what was detailed in the initial agreement; to any funds, penalties or property after the exchange has occurred. In other words, you exchange a property for another one of equal or greater value. If you have an existing mortgage on the older property that mortgage is unchanged if the bank goes under. The mortgage will probably be sold as an asset to the buyer of the bank.

After the exchange, in my experience, the mortgage is paid off and the new property is assumed under different terms, but part of the same deal (for tax purposes). My team went into bidding on a property with 1031 exchange funds with the hope of acquiring a small shopping center.  The trade went well. I am happy with it. However, property values have slipped a bit. So, it’s time to get out there and get new tenants!

Bommers Selling New Duplex for $48.9M

 

Not only does the sale come in the middle of a relatively sludgy, even gloomy real estate market, but there’s the downright flabbergasting fact that the Bommers bought the apartment only this January. They paid $46 million, setting a record for a Manhattan co-op sale.

That record was broken this summer, when the chairman of the Loews conglomerate, Jonathan Tisch, agreed to pay $48 million for a co-op at 2 East 67th Street (though the deal hasn’t closed yet). So not only will the Bommers be making a quick couple of million dollars, but they’ll be reclaiming their slot atop the New York City co-op hierarchy.

It’s not clear who’s buying the penthouse duplex, with its greenhouse and a 114.5-foot-long terrace facing south, plus a maze-like master bedroom suite and a corner living room facing Central Park. But Mr. Bommer is well-connected: He sits on the board of the tremendously important Robin Hood Foundation with Richard Fuld, Bob Pittman, and Gwyneth Paltrow.

The apartment, besides its $48.9 price, still needs quite a bit of work–which according to The Observer’s source was one of the reasons why the Bommers decided to sell. Among other things, the top and bottom floors have to be combined into a real duplex: Georgia Shreve, who sold the apartment in January, had proposed combining the units (in an “18th-century” style, she told The Observer last year) though the building’s board turned her plans down

In order to qualify for better deals, you need a better credit score. Period.  Today, Flip Board readers will get a short “to do” list for cleaning up your credit file and upping your scores.  The techniques did work for me when I used them. As a matter of fact, I increased my lowest score (out of the three major bureaus – Equifax, Transunion, & Experian) 50 points in under 120 days!  No kidding…

Obviously, you must first get a copy of your credit report from all three agencies.

Use These Numbers to Order Reports:

• Equifax 1-800-685-1111 This one lets you get a free report if you have been denied credit in the last 60 days. Option 2. Make sure that you order only the credit report. Mail within 48 hours.
• TransUnion – 800-916-8800 – mail within 6 to 8 business days.
• Experian – 888-397-3742 – receive within 8 to 10 business days.

1. Letter writing campaign-  Once you check the accuracy of the report, highlight discrepancies and fallacies and note the creditor’s information. You can write a letter challenging each occurrence to the credit bureau. The credit bureau will challenge the creditor on its accuracy. If no correction is received from the creditor within 30 days of the credit bureau’s request, then the credit bureau will remove the discrepancy. Now, items can always be resubmitted by companies looking for payment, but, this method is very effective in quickly moving your score for a purchase you are about to make.

2. Pay your bills on time – I know this is a no-brainer. But, come on…. You wouldn’t be reading this if this was not an issue.  13 months of timely payments on a revolving account increases your score considerably.  13 is the magic number. If you are planning on acquiring a mortgage next year, pay your current mortgage or rent ON TIME for 13 months. Easy, right?

3. Close unused lines of credit – Having two Sears charge cards and four bank credit cards with $800 bucks open credit sounds good, right? I mean, you can get a bunch of credit, so that means you are credit worthy, right?  WRONG.  Many small (under $2500) lines of credit with little to no balances is a red flag for creditors. This tells them that when times get tough, you will spread debt across several accounts that can fill rather quickly.  Here’s what you do: On the OLDEST account you have, request a balance increase. An extra $500 bucks or more would be great. But take what you can get.  Next, close all of the little, unused accounts; especially the new ones (anything newer than 2 years). One should really never have more than 3 credit accounts anyway (IMHO)….

 4. Mortgages then Revolving… – Make sure your credit report is weighted accordingly. Your report should have more current mortgages and rent payments, then revolving lines of credit and finally retail or fixed payment accounts. The last set is where your one or two car payments or fixed interest, signature loans lie. The weights could be number of accounts or dollar amounts of each account. But they should fall in this order. Close accounts, payoff accounts and open new accounts until your credit report is organized like this.  And make sure you keep everything current and on time.

 5. Only 5 Inquiries per year – Constantly asking for credit triggers an “inquiry” on your report. An inquiry is simply a note that says an institution has pulled your report. Multiple notes in your report with no accompanying “new account” listed shows a desperate person, running around town trying to get credit. It looks very bad. For us real estate investors, we get inquiries all the time. But, multiple requests within a month looks like you are shopping around for the best deal. Spreading that out across 6 months looks desperate.  So, for real estate deals, it’s OK. But for personal credit, keep it to 5 attempts each year.  And let’s be honest, you know if your credit is crap before you walk into that store or sign onto American Express.com. If not, run your own report. That will not show up.

But what about Commercial Properties?

It all depends on the area. Location is extremely important for commercial real estate as businesses are looking for foot-traffic (number of people walking in front of their door), expandable space or desirable neighbors. (How nice would it be for a tech start up to sit in an office building right next to Microsoft, Apple or Google?)

Right now, commercial real estate is dropping as demand decreases, prices decrease and inventories increase. Your best bet for profits now are to look towards lease-options or other similar purchase agreements. Here, you can control the building with the promise of buying it at current price levels. And in 3 to 5 years from now, refinance the building, sell it or increase lease amounts on your tenants. Any of these options will increase your future profits on a deal you today.

My target audience or market has been severely cut back due to the fact that it has only 1 bathroom.

I could potentially by it on the cheap, pull the equity out within six months and just hope I get a renter or immediately put it back on the market. This lets me realize some pretty quick cash, but it also increases my liabilities while it sits unoccupied. In this housing market, that is something I am going to avoid.

 After talking with my RE agent about the area and prospects for the house, I decided to just walk away from the deal.

 This deal is officially closed.

On to the next one!

I found a gem of a foreclosure that is located next to a public golf course. 

It should appraise for about $208,000 – 230,000 after about $15,000 in repairs and upgrades.

 The place was built in 1918 and is a 4 BR 1 BA “old-school” colonial, complete with tall white columns.  Being next to a historic neighborhood and the local university should prove this house’s staying power.  The bank is asking for $111,000, but I could probably knock a little off of that, maybe $10k.  We will see.   (This deal will leave me about $84k in equity if the numbers pan out.)

Before I start that process, I have to make sure of a couple of things. First, the foundation and the overall structure has to be sound. Afterall, the place is almost 100 years old. Second, I have to make sure the house fits into my strategy of buy and hold.  This means, I won’t put myself at a disadvantage when it comes to monthly mortgage notes. You never borrow more than you can handle! And you never try to rent in an area that has no viable renters. And lastly,  I need to make sure that the repairs needed won’t “break the bank”.  If it will take more than $20 – $35k to fix up this place, then I simply walk away and look for another deal.

Good Luck to me!

“We are starting to see evidence of a rise in high-end foreclosures across the nation,” said James J. Saccacio, chief executive officer at RealtyTrac. “With the auction of the Hearst mansion in Palm Beach, Fla., and the scheduled auction of Michael Jackson’s Neverland Ranch, it appears that even the rich and famous are not immune to foreclosure.”

Last month, the oceanfront south Florida mega mansion owned by the widow of publishing heir Randolph Hearst went on the auction block at the Palm Beach County Courthouse. Veronica Hearst’s Manalapan estate — known locally as Villa Venezio — was auctioned for $22 million. Sitting on 3.5 acres of beachfront property, the 32,000 square foot trophy mansion — complete with 9-bedrooms and 12 full bathrooms — was originally built in 1929 for the grandson of Cornelius Vanderbilt.