Southwest Florida Real Estate News

Real Estate Foreclosures Tips & Techniques

The first step in working with foreclosures is to develop a financial and strategic plan. Determine your goals. Decide if you are going to use your purchase as a private residence, for rental income and/or to fix up and sell for a profit, often called flipping.

The second step is to identify your finances. Determine how you are going to finance your purchase. Even if you have the cash, many times it is wise to utilize a loan and use cash flow or appreciation to grow your net worth, while using your disposable cash to control another property. Decide if you want to use partners.

The third step will be to choose which stage of foreclosure you want to concentrate on. We recommend the pre-foreclosure or post foreclosure stages. See below.

The final step is to be physically present in the area where you wish to acquire foreclosed property. Time is of the essence and due diligence cannot be accomplished remotely.

Stages:

Pre-foreclosure- a foreclosure action is the legal procedure that a lender initiates to reclaim ownership and possession of a property after the borrower fails to repay the loan in accordance with the contract terms. At this step the borrower is unable to work out an alternative payment plan to satisfy the past due amounts. The lender will notify the mortgagors of the default and file a complaint in the court (notice of default) in the county in which the property is located. TIP: We have ways of finding pre-foreclosures.

NOTE: Learn how to approach a borrower before the property goes to auction. We can help. Benefits- assume existing mortgage, offer to pay past due balances to eliminate bad credit for the borrower, obtaining owners equity at a discount allowing the owner to walk away with some cash and eliminate the negatives found under foreclosures below.

Foreclosure- a summons is issued to the borrowers and this initiates the foreclosure process. A notice is sent to all parties having an interest in the property. The court date and time is set for the auction. A court appointed trustee is assigned. Creditors will appear in court but the borrower does not have to appear. If the bids are not sufficient to recover the outstanding loan balance, the lender may bid and buy back the property. The lender can sue the debtor to collect any deficiency. TIP: We suggest that you attend several foreclosure sales to get a sense of how things occur.

NOTE: When you buy a foreclosure on the courthouse steps, you have to pay cash, property taxes, be responsible to evict the property owner, pay home owner association dues, pay for insurance, make property repairs, become a landlord, and possibly pay mortgage expenses. Additionally, there is only a brief time to inspect the property and you are bidding against other full time investors.

Post foreclosure-The lender has purchased the property at the auction and placed the property up for sale (REO or real estate owned). TIP: Contact a real estate agent who handles them in your area. (Jim Wiedl at Brenner Realty 800-358-4552)