Buying, Selling, or Flipping Foreclosed Homes Part II
In my last blog I left you at the step of Identifying prospective properties for purchase through foreclosure. Now comes the fun part! There are 3 different ways to buy foreclosed or pre-foreclosure (short sale) properties:
1. The Short Sale.
This is when the deal is done through the seller, with approval from the bank, accepting any losses on the short sale. In this instance the bank is basically saying that they don't want to have to go through the hassle of selling the home themselves. They are in the financial business, not the real estate business and it takes time, man-power, and costs them money to have the home cleaned out, to hire a realtor to list the home and pay them commissions, and to deal with the paper work and red tape required to foreclose on a property. Sometimes they would rather take a loss on the property up front rather than go through all of that hassle so they accept a deal for less than what they are owed. Once again this is what's known as a Short Sale.
2. On the court house steps at the foreclosure auction.
This is arguably the best way to find a true deal on a home, but it is also the most time consuming, frustrating and difficult. It starts with visiting your local courthouse and finding where the list of homes to be sold on the courthouse steps is posted. This is usually outside the clerk of courts or register of deeds office and is posted on the 1st of the month...although sales aren't held every month. Then comes the research. This part of the process is very involved and difficult to explain so call me when you get to this point and I'll help you through. Basically you must pull the file on the property, contact the executor on the estate to insure the home is actually going to be sold, find how much is owed to the bank, complete a comparative market analysis to determine the value of the home, visit the home to see the condition so you can get a feel for how much it's going to cost to get the home in livable condition (if any), then hope that the home actually makes it to auction. The homes are sold in true auction form and you must have bring with you in certified funds 10% of the final auction amount. You must wait through the 10 day upset bid period through where anyone can upset your winning bid by offering more than 5% of what you offered. These upset bids will go back and forth until no one brings a higher offer. Then there's a 5 day statutory redemption period where the original owner can buy the property back from the bank for what is owed. If you make it through all this, the home is yours! Like I said, it is hard work.
3. Through the bank after a foreclosure auction where no one bid high enough to satisfy the bank note.
If no one buys the home at the auction, or the bank feels they can get substantially more for the home on the open market, the bank will have a Realtor list it as bank owned. They will usually price it under market value and negotiate substantially more than a typical seller. This process is more difficult than a typical sale because you're dealing with a bank, not an individual, and it can take weeks to get an answer on an offer, but often you'll get better than market price on the home.
Did you know that you can get FREE buyers representation just by calling me at 704.467.0669. My commission is paid by the Seller! What does that mean? That means you have someone fighting on your side, someone who already knows and has great relationships with the inspectors, attorneys, surveyors, handymen, and property managers needed to make the transaction happen, all for FREE! It's as easy as a phone call.
