It’s a fact that with a busy lifestyle and rising cost of living, many people experience financial trouble notably in paying promptly important bills including their mortgaged homes. Fortunately, there are real estate flippers who are on the lookout for pre-foreclosed or foreclosed homes and who can provide instant cash to solve mortgage problems. Home flippers normally pay cash to ensure a speedy closing of the transaction.

So, if you want to earn huge profits in your home flipping projects, then it’s time you think about investing in foreclosed homes. Flipping a foreclosed home is about buying an undervalued residential property that needs repair and selling it again at a higher price.

Buying a foreclosed home or what is called the retail flip can be done any time but the pre-foreclosure period is ideal. There’s something you need to know, though, about foreclosures. It’s not true that bank is the only and best source in buying a foreclosed home. You can deal and buy directly from the homeowner if you have the necessary funds.

Foreclosure refers to the situation wherein the homeowner or a mortgager fails to pay the principal and/or interest payments on his or her mortgage. The lender (bank or financier), in turn, has the authority to withdraw the property and sell it according to the terms and conditions of the mortgage contract. The pre-foreclosure period starts when the homeowner misses his or her payment making it an overdue on the loan. A notice is then sent to the homeowner requiring him or her to make the needed payments to settle the dues. In most cases, homeowners who face financial difficulty are forced to sell their home to buyers for fast cash.

In this situation, both the buyer and homeowner benefit from the foreclosure. The homeowner gets paid in full and can appeal to several buyers by accepting different financial plans. The buyer, meanwhile, saves money by 30 to 40 percent when purchasing a foreclosed home which is really cheaper than normal homes.
Also, buyers are giving homeowners the chance to do some investments for his home’s improvement and/or to sell it at a higher value.

Investing in foreclosed homes can be done in several ways. One is to buy a residential real estate property and have it rented to avail of a regular monthly cash flow. Another way is to buy a home, spend a certain amount for renovation and resell the property at a higher price. Still another method is to buy an under priced home and immediately sell it at a higher value. There’s also wholesale flipping wherein the investor buys a distressed home under contract to purchase and then sells the contract for a fee to another investor who is the one who closes the flipped home. The primary investor, in this case, serves as the wholesaler amassing undervalued homes that are distributed to several real estate investors.

Take the time to know more about foreclosures and flipping foreclosed homes to be sure about what you’ll be doing. Do learn about the neighborhood you are targeting and get to know how similar homes are selling. From there, you can make your plan to guide you on your project or you can make a team that includes a home inspector, contractor, realtor, attorney and tax accountant. And most important of all is to be prepared for the worst to prevent shocks and surprises.

Check out our page for Foreclosed Home Listings!

Recent Foreclosure Listings – Find foreclosure listings in your local area!

Yahoo! HOME VALUES - A common question is “how much is the property worth?”. You can find recent comparable sales at this site.

DOMANIA - Another source for comparable sales

ZILLOW - Some people love their comps, others think they are wildly innacurate

SMART HOME BUY - Provides property reports which include recent comparable sales.
$14.95 for 10 reports, $9.95 for 5 reports, $4.95 for an individual report

MORTGAGE CALCULATOR - A calculator to figure out the payments at different interest rates and terms.

NETRONLINE - A portal to official state web sites, county assessors and recorders.   Online record sources listed where they are available.

LANE GUIDE - A complete guide to U.S. lenders. REO depts. and phone numbers are included where available.

Yahoo! MAPS - If you aren’t sure where the property is, this will help.

LEGALWIZ LEGAL FORMS - Variety of legal forms provided by the LegalWiz, William Bronchick

Seminars

An easy way to spend a lot of money.   The personal motivation inspired by the speaker will always last long enough to provide you time to buy the books or courses.  If you are truly motivated to become an investor, you don’t need a seminar.  On a positive note, if you are an active investor and have already bought a course to increase your knowledge, a seminar is one way to allow the author or presenter to expand on their printed material.

Books and Courses

Available at Libraries, Bookstores and Websites.  Balance the cost against the information presented.  You can’t really argue the benefits of a twenty dollar book against a seventy dollar book, both undoubtedly have good points and bad points.  Try to find the most appropriate information for your situation at a reasonable price.  Courses costing hundreds of dollars or more should not be purchased by a new investor.  When you have the basics down solid and want additional information or specialized information, then consider additional courses.   Remember, your success will not be determined by the size of your library, but by your motivation and knowledge.

Cash Investors
Take our course, we’ll back you up financially!  Great sales pitch and I’m sure it would happen if the property could be purchased cheap enough, but anyone can find a cash investor.  The hardest part is finding the property.  You don’t know any cash investors?  Look in your local Yellow Pages under Real Estate Loans.  Look for ads that say “All Credit” or “Any Credit”, typically these are hard money lenders(cash lenders) who have investment money.  Can’t find any?  Look in your local newspaper for real estate ads saying “We Buy Houses”, these will often be cash investors.  Still can’t find any?  Look in your local legal newspaper for Notices of Sale.  A location will be listed where properties in foreclosure are going to be auctioned off.   Go to the location at the time specified and talk to the investors who show up.   These are investors used to dealing with properties in foreclosure, find out their requirements, get phone numbers and you are all set.

Personal Counselors

Sign up with us and we’ll provide one-on-one help for as long as you need it.  Oh, I’m sure they have experienced investors just sitting around waiting for the phone to ring.  There are newsgroups where you can have your questions answered, but your best source of help is going to be investment clubs.  Clubs are comprised of local investors who will share information and resources with you.  They will have a good grasp on area values and should be able to help you more than anyone else.  Plus, if you haven’t found a cash investor yet, this is a good place to find one or get referred to one.  Look in the Yellow Pages under “Clubs”,”Associations”,”Real Estate” or various web sites have lists.

Recommendations

Take a deep breath, relax and plan your success.  You’ll need information, resources and knowledge.  Find a local investment club, ask where and when they meet, go to all the meetings, absorb everything you can and make contacts.  Evaluate the books and information you have seen, pick a source and start reading.  Follow the web site discussion groups, print articles that have resources or solid information and save them.  Read all the articles you can find on different web pages, it will add to your knowledge.

Consider completing a Real Estate Licensing Program

Many established real estate companies provide subsidized Real Estate Licensing School.  If you do not have a background in real estate, this is a fairly inexpensive way to get an education regarding the technical processes involved, what is necessary to sell a home plus all sorts of  additional knowledge.  Many companies charge a higher fee if you do not get your license and work for their company, so be sure to shop, an independent school might be cheaper.  Look in the Yellow Pages under Real Estate Schools.   Keep in mind that if you actually obtain your real estate license, you have different legal considerations than if you are unlicensed.  Even if you don’t actively sell property full-time, when licensed, you are considered a real estate professional.

Go to Open Houses

Every weekend houses are held open by Realtors.  Go to all the open houses in your area every weekend.  You’ll learn what sells, what doesn’t, what the price ranges are in different areas and start to build a knowledge base of property in your area.  It takes gasoline and time, but it’s the best way to get a feel for what values are in a given area. 

Build your Resource File

Organize your information and file it.  Individual properties will come and go, but six months from now, you don’t want to find a property that suits a cash investor’s requirements and discover that you cannot find the investor’s phone number.  Or you were supposed to check back with a property owner this week, but you can’t find the paperwork and don’t remember the address.  The only way to keep track of everything is to have organized files that you use.

Understand it doesn’t happen overnight.

Honestly, the first few times you try to put a transaction together, I would expect problems.  It’s part of the education process.  As long as you don’t make the same mistakes again, you’ll only get better at what you do.  Education is the first big hurdle, the second one is experience, and there’s only one way to get that.  To just do it.

When everything is looked at, MOTIVATION is the base for all of it.  You have to be motivated to get the education, you have to be motivated to get the experience and you especially have to be motivated to keep on doing it through the times where nothing seems to be going right.

Are you ready to get started?

The best place to begin is through reviewing your local foreclosure listings.

Learn to Invest in Foreclosed Homes

Does this sound like you?  I want to buy a foreclosure at 50% of Market Value, change the locks and put a real estate sign in the front yard and make a ton of money in 30 days. Oh yeah, I don’t want to put a penny of my money into the deal either!   Well, everyone wants to do that, but I’ve never seen it happen!

The reality of foreclosure investing is far different than what many people have seen either through infomercials or books that have been written. We don’t sell books, so I’ll tell you what I’m aware of in the foreclosure investment field. First, everyone I know who is an active investor works an awful lot more than people working 9-5 jobs. Second, serious players either have a significant amount of money of their own or have an investor backing them up. Third, houses that are going to sale almost always need a lot of work to bring them to Market Value. Fourth, finding a solid property to purchase isn’t a matter of picking what you want, it’s a matter of finding something that works economically, keeping track of it, finding out all you can about it, then beating out all the other investors who are interested in it. Sound discouraging? People treating this business seriously invest a lot of time and energy into finding and following properties.

So, is it possible to make money in the foreclosure business?   Sure, the key is to know your strengths and weaknesses.

The first example is the major problem most beginning investors will have. What is the Market Value of a property you are interested in? Experienced investors will usually all have a property valued close to the same amount (3% variance). They will use local Multiple Listing Service comparable sales, Title Company comps and experience to come to that value. If you are not fully aware of what a property will sell for on the open market, you cannot do anything with a property. All decisions regarding a property are based on the price it will receive, Know The Value!!

The second issue of importance is the law. If you know of a property where money can be made, you do not want to run into legal issues because you structured a deal that is illegal in your state. Yes, states have laws regarding what you can and cannot do with owners who are defaulting on their home loans. Do your research, find out whether your state uses Mortgages or Trust Deeds and the legal timeframes and implications of each.

The third issue is money. It certainly helps if you’ve got a good amount to back your purchases, but if you don’t, it is not impossible to do deals. You do need enough to be able to find properties, keep track of properties and cover on-going office type expenses. I was once told, “Money should never stop you from doing a deal”. It’s true. If you have a deal, someone to invest in it is easy to find. If investors don’t want to invest, it’s not a deal.

The fourth issue is knowledge. Federal tax liens, partial interests, leased land, property information wrong, unpaid property taxes and wrong common descriptions are all things that have hurt investors. If you are not aware as to how to check for these things, you shouldn’t be investing in foreclosures. The things that will make a deal head south are the things that are not obvious.

Time to evaluate strengths and weaknesses.

If you don’t have a strong grasp of market values in your area, aren’t sure about your state’s legal requirements, don’t have significant money to invest and don’t know how to follow up on real property information, you need to spend some time learning the things you will need. Read, make contacts and talk to people involved in the business. They are easy to find, they will be at local Trustee or Sheriff’s Sales.

However, if you have a good knowledge of the requirements and think you can learn as you go along, I recommend you begin to pursue this market through our Foreclosure listings page. 

When the entity (in the US, typically a county sheriff) auctions a foreclosed property the noteholder may set the starting price as the remaining balance on the mortgage loan. However, there are a number of issues that affect how pricing for properties is considered, including bankruptcy rulings. In a weak market the foreclosing party may set the starting price at a lower amount if it believes the real estate securing the loan is worth less than the remaining principal of the loan.

In the case where the remaining mortgage balance is higher than the actual home value the foreclosing party is unlikely to attract auction bids at this price level. A house that went through a foreclosure auction and failed to attract any acceptable bids may remain the property of the owner of the mortgage. That inventory is called REO (real estate owned). In these situations the owner/servicer will try to sell it through standard real estate channels.

The process of foreclosure can be rapid or lengthy and varies from state to state. Other options such as refinancing, alternate financing, temporary arrangements with the lender, or even bankruptcy may present homeowners with ways to avoid foreclosure. Websites which can connect individual borrowers and homeowners to lenders are increasingly offered as mechanisms to bypass traditional lenders while meeting payment obligations for mortgage providers.

In the United States, there are two types of foreclosure in most common law states. Using a “deed in lieu of foreclosure,” or “strict foreclosure”, the noteholder claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as “judicial foreclosure”), the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the immovable property in return.

Other states have adopted non-judicial foreclosure procedures in which the mortgagee, or more commonly the mortgagee’s servicer’s attorney or designated agent, gives the debtor a notice of default and the mortgagee’s intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as “statutory” or “non-judicial” foreclosure, as opposed to “judicial”. With this “power-of-sale” type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff’s auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.

“Strict foreclosure” is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. The foreclosure sale purchaser must petition a court for a decree that will cut off any junior lienholder’s rights to redeem the senior debt. If the junior lienholder fails to do so within the judicially established time frame, his lien is cancelled and the purchaser’s title is cleared. This effect is the same as the strict foreclosure that occurred at common law in England’s courts of equity as a response to the development of the equity of redemption.

In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days’ notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the foreclosure have a federal tax lien filed against them, the proper notice to the IRS will be given. A detailed explanation by the IRS of the Federal Tax Lien process can be found.

The US congress passed and President Bush signed into law a temporary change to the tax code. For the period Jan. 1, 2007, through Dec. 31, 2009, homeowners will not have to pay tax on any debt that is cancelled. (note that there are exceptions, such as when the cancelled debt is not on the borrowers’ primary residence.)

To check out some homes up for foreclosure in your local area, check out our foreclosure listings!

The concept of acceleration is used to determine the amount owed under foreclosure. Acceleration allows the mortgage holder to declare the entire debt of a defaulted morgagor due and payable. If a mortgage is taken, for instance, on a $10,000 property and monthly payments are required, the mortgage holder can demand the mortgagor make good on the entire $10,000 if the mortgagor fails to make one or more of those payments.

The vast majority (but not all) of mortgages today have acceleration clauses. The holder of a mortgage without this clause has only two options: either to wait until all of the payments come due or convince a court to compel a sale of some parts of the property in lieu of the past due payments. Alternatively, the court may order the property sold subject to the mortgage, with the proceeds from the sale going to the payments owed the mortgage holder.

If you’re behind on payments, it is best to know what this is so you don’t find your home listed here.

Types of Foreclosures

The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States and many other countries, several types of foreclosure exist. Two of them — namely, by judicial sale and by power of sale — are widely used, but other modes of foreclosure are also possible in a few states.

Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state and required in many, involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state. A judicial decision is announced after pleadings at a (usually short) hearing in a state or local court. In some fairly rare instances, foreclosures are filed in Federal courts.

Foreclosure by power of sale, which is also allowed by many states if a power of sale clause is included in the mortgage. This process involves the sale of the property by the mortgage holder without court supervision. It is generally more expedient than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.

Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure, which is available in a few states including Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee and if successful, a court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. Historically, strict foreclosure was the original method of foreclosure.

Foreclosure is the legal proceeding in which a mortgagee, usually a lender, obtains a court ordered termination of a mortgagor’s equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan.

If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the owner the right of redemption if the borrower repays the debt. When this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption.

The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property.

When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien”. If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principle and fees the mortgagee can file a claim for a deficiency judgement.

To see some foreclosure listings currently available in your area, check out our Foreclosure Listings page!