A Few Strategies for How to Find Foreclosures
By Charles L Harmon
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The current economic environment with millions of mortgages in trouble can lead to a gold mine of opportunity for investors with cash on hand or access to credit. Here in Southern California there is a mad rush for any kind of home, whether foreclosure or otherwise.
But, how to find foreclosures is an issue that must be addressed before investors can fully profit from the situation. Here are a few ways how to find foreclosures.
The first step in how to find foreclosures is developing a list of properties. There are several sources for this.
One thing you can do is contact a real estate agent who specializes in how to find foreclosures. Because it is increasingly difficult for agents to make traditional sales, many are developing niche specialties. One of these specialties is foreclosure listings. These agents develop relationships with banks that have pre-foreclosure and foreclosure listings. Working with an agent can reduce a lot of hassles. But, you also have to realize that the banks will factor in their fees into the final negotiated price.
Another way to find foreclosures is to go to individual banks’ web sites. Scouring these sites individually provides a free way to get lists of foreclosures. Similarly, you can look at classified advertisements, especially the legal notices section. You can also go to the courthouse and pull the records for foreclosure filings.
[note] trust deed noun
A written instrument legally conveying property to a trustee, such as a bank, often for the purpose of securing a mortgage or promissory note.
Also called deed of trust. [/note]
When you are answering the how to find foreclosures question this way, you are investing a lot of your time in just gathering leads. Time is money. For most investors, the thing that makes the most sense is to subscribe to a how to find foreclosures database.
Many of these foreclosure listings have free initial periods of 3 to 7 days. After that, you will pay $40 to $50 a month for updated listings.
It is important to know which kind of list or lists you are buying. There are three main lists of how to find foreclosures.
The first is the pre-foreclosure list. This is a compilation of people who are behind on their mortgage payments but who have not yet lost their homes. If you get involved with the homeowners and banks involved at this stage, you will be working as a short sale investor. This means that you buy the home for less than the mortgage amount, the bank writes off the difference, and the homeowner walks away without a deficiency judgment on their credit records. Often homes bought at the pre-foreclosure stage are in the best physical condition.
The next list is the directory of upcoming foreclosure auctions. After a bank repossesses a home, they are required to auction it off to the highest bidder. This is because they can usually get a deficiency judgment against the homeowner who defaulted on the mortgage. They are required to get the highest price at auction and only go after the homeowner for the difference. In many cases, there are no bidders at the auction and the bank buys the home for $1 over the deficiency. A savvy investor can pick up good deals at auction.
Finally, there is a list of bank owned homes. These are the properties that the bank bought back at auction. They are now sitting vacant, depreciating in value, and taxes are accruing on them. Banks are quite eager to get them off the books. As such, you can often pick them up for 20 to 30 off of percent of appraised value (and the appraisal is less than it would have been if you had bought them in pre-foreclosure).
Note that different states have different foreclosure laws and procedures. You need to be aware of anything that could affect foreclosures. You also need to know if there could be liens on any property you bid on if you buy from an auction.
How to find foreclosures begins with finding a good list of troubled homes to start with. But before you can do that you need to have cash or credit available quickly. There is a huge rush in certain areas, such as mine in The Inland Empire area of Southern California. The home prices were so depressed that now that they are rising more people are in the market for homes including foreclosures.
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