Understanding The 3 Stages Of Foreclosure
March 2, 2009, Writen by: Chris Anderson, Ph.D
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If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
However, what many people also learn is that finding, buying, servicing, and reselling foreclosures is a lot of work.
If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
Considering the home pictured to the left, you can try to acquire this home at 3 different stages:
- Preforeclosure - The bank has not yet foreclosed on the current owner;
- Foreclosure Sale - Typically auction style at the court house steps; and
- Bank REO - After the bank acquires the property.
PREFORCLOSURE:
In this stage, you are typically negotiating with the current owner to reach some sort of advantage
ous agreement. Unfortunately, many owners at this stage are very unrealistic in their expectations and as a consequence, many times you cannot get a good deal.
Also during this stage, you will have to have a stratedgy to deal with the underlying mortgage holder…. the bank. While there are many possibilities of how to accomplish this task, rest assured that unless you are trying to acquire $5M of property, you will not be high on the priority list of banks.
In short, this can be a very time consuming process where you need to look at many deals to get one.
FORECLOSURE SALE
The next option is to buy the property at the court house steps during a bidding process. In this case, you are bidding against many other professionals in the hopes that you can get a great deal. Of course, you have lots of issues like:
- You don’t know the minimum that the bank will take in advance;
- You cannot inspect the property (inside) before the sale;
- You will typically need to cash buy the property with 24-72 hours after the sale.
While some people make a living doing this, it can also be a very time consuming process.
BANK REO
This is our favorite stage to purchase….. after the bank has been forced to take the property back. In this case, there is two methods to buy:
Method 1: Bank REO’s go out to brokers at somewhat reduced rates. Generally, this is not your most advantegeous time to buy because the bank is still trying to maximize returned capital.
Method 2: Banks bundle 100’s if not 1000’s of homes together and sell them to private equity groups at pennies on the dollar because of the large volume that they buy. What BankREOSpecialists.com does is then bring those properties to you at incredible prices.
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