You can buy a foreclosure at three stages in the process: preforeclosure, at public auction, and postforeclosure, at which point the property has been foreclosed upon and taken back by the lender (these orphans are known in the business as "REO" for "real estate owned").
It's important to realize when talking about pre-foreclosures, we are talking about acquiring the property any time before the public auction sale. The sooner you contact a homeowner in pre-foreclosure, the more time you have to structure a deal and purchase the property.
Pre-foreclosures focus on the first step, where the owners of the property are still in control of the situation. If the owners can satisfy the delinquency, the foreclosure process comes to a halt. What some savvy investors do is to contact these owners to see if they would like help. This help usually comes in the form of selling the property to the investor for a very low price, but it keeps them from being foreclosed upon and they can usually walk away with a few thousand.
Equity is the Key
The first step is to determine if there is any equity in a home. If they've owned the property for a short period of time, chances are there is little equity unless they put a large amount down. If there isn't a lot of equity, there isn't much reason to spend time working up this property as the equity is where you're making your money.
- You need to do a little research to determine if there are other liens on the property that will have to be subtracted from the equity. Tax liens are biggies and can usually be determined from a search on the County Recorder's website or County Assessor's site.
Face Time
The next step is to contact the owners. Don't forget, there are a lot of people like you doing the exact same thing, so they are going to get a lot of calls. Stand out by being the one who shows up.
- Here's the math you're working toward. Pay off the mortgage, catch up all back payments as well as any other lien that may be on the property, pay all the closing costs, and have the owner walk away with some amount of money ($2,000 to $10,000).
Additional NOTE
The following documents are necessary and accompanied with a brief explanation: This chapter was contributed by Gerald Romine. http://www.azpig.com/ , gerald@azpig.com
- Standard Purchase and Sales Agreement & Escrow Instructions:
This document sets forth the terms of the sale.
- Authorization To Release Information:
This document allows us to contact the bank, discuss the property and the loan, and work out payment/payoff arrangements.
- Letter Of Agreement and Addendum:
This document clarifies that we will do our best to stop the foreclosure, but are unable to make any guarantees. We will not make promises we are unable keep.
- Warranty Deed To Trustee:
This document conveys ownership of the property. Must be signed before a notary.
- Agreement and Declaration Of Trust:
This document creates the land trust. A land trust is nothing more than an entity we use to title the property and keep our name off public records.
- Letter That Trustee is Making Payments:
This letter is used when taking property "subject to" and notifies the lender that payments will be coming from a trustee.
- Escrow Letter:
This letter instructs the lender to apply to funds in any escrow account to the loan balance when the loan is paid in full. There is no guarantee the lender will comply with the instructions and they may send the escrow proceeds to the original borrower.
- Special Power of Attorney:
Applies only to the property and is used to handle any situations that may arise. Must be signed before a notary.
- Residential Real Estate Disclosure:
Discloses any defects in the property and prevents parties from saying, "I did not know about that defect." Complies with state law.
- Hardship Letter:
When dealing with foreclosures, the lender normally requires a letter from the borrower explaining their hardship and why they are unable to make the payments.
- Financial Statement:
Before discounting a loan and taking a known loss, the lenders will want to review the original borrower's financial statement and make sure the borrower does not have the ability to repay the debt now or in the foreseeable future.
ELITE REALTY
7448 W.Sahara Ave. #106 • Las Vegas, NV 89117
Office: (702) 856-6680 • Cell: (310) 529-5360
Website: http://www.lasvegas-buyandsell-realestate.com/ • Email: arina.lv@gmail.com
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