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Finding Foreclosures: 5 Ways to Get Good Foreclosure Deals

By Melissa Dittmann Tracey

QUICK SKIM

Bargain shoppers are on the hunt for foreclosures, so get ready to help them find a hidden gem. But first, you might benefit from some pointers. After all, buying foreclosures can get tricky — whether you’re making the purchase at auction, through a bank, or from an emotional and financially-strapped home owner. In the new book Finding Foreclosures (Entrepreneur Press, 2007), real estate investor Danielle Babb and mortgage broker Bill Nazur take you through the complexities of buying foreclosed properties, from finding the best deals to avoiding common pitfalls.

Buy the Book

FROM THE BOOK: 5 WAYS TO GET GOOD FORECLOSURE DEALS

Foreclosure rates are spiking and brewing up a hot market for investors and buyers. To get the best deal possible, follow these tips from the authors:

1. Timing is everything. Borrowers often are given a chance to avoid foreclosure with a grace period, typically two to three months, to pay off the amount they owe. The borrower may opt to sell the property during this pre-foreclosure stage if they can’t make up their missed mortgage payments. This is typically the best time to strike a deal, as home owners are looking for ways to avoid foreclosure. Another prime time to buy: prior to an auction date.

2. Look in the right places. Follow the foreclosure trail. Title companies, banks, purchase money escrow offices, and credit unions can be good sources to find out about new foreclosures. Online services, such as RealtyTrac provide national information on foreclosures, broken down into such categories as bank-owned, auction, and pre-foreclosure. The Hudson & Marshall Web site has auction schedules and even lets you make bids online.

3. Know when to walk away. For properties that have been left vacant for any amount of time, it’s important to check for any plumbing or electrical issues, vandalism, foundation problems, and mold. Recommend that your clients spend money on a home inspection to ensure they’re not overlooking problems that would be expensive to fix. Even if the property’s price tag has been steeply discounted, it still might not be the best deal.

4. Do your research. Before buying a foreclosed property, your clients should have the home appraised to get an accurate estimate of value. Also, they should ensure the title is clear and check for any liens — such as builder liens and taxes — that need to be paid off. This is public information and usually can be found at a county’s recorder’s office. Find out how much is owed on the home and make a list of everything that needs to be repaired, with an estimate of costs (add 10 to 20 percent to pad it). Now, you’re ready to make an offer.

5. Buckle your seatbelt. Foreclosure deals often move fast and require constant monitoring as properties wind their way through the process. Home owners who were in shock or denial or banks that have taken over ownership of the property may initially reject your offer. But don’t give up. Follow up is key — especially as an auction or REO time nears, they may change their mind. “The early bird definitely gets the worm in the foreclosure market,” the authors say. Remember, if it looks like a great deal, other buyers are undoubtedly looking too. Therefore, make your offer more appealing, such as by being able to close in 14 to 21 days. While escrow periods are usually 30 days, you can find some banks that can act faster.

SNEAK PEEK

“The owners of homes in foreclosure can be extremely frustrating to work with, but put yourself in their shoes. They may feel embarrassed, ashamed, or inadequate, especially if they have a family. They may feel like they have failed, and here you are, Ms. Money Bags, coming in to take their home from them for lower money than it is worth …. If you insult them, annoy them with phone calls, make them feel lower than they already are feeling, or treat them in a lesser way than you’d want to be treated in this situation, you are sure to lose the deal, not to mention kick someone while they are down.”

ABOUT THE AUTHORS

Bill Nazur is a licensed real estate professional in California, and has more than 20 years of experience as a mortgage broker, real estate finance specialist, and in sales and marketing. He’s worked for major lending institutions, such as Bank of America and Washington Mutual. Co-author Danielle Babb, author of Commissions at Risk (Kaplan Business, 2006), is also a California licensed real estate professional and a technology specialist in real estate.

Check back on Monday, Nov. 5, to read the authors’ responses to your previously submitted foreclosure questions.

Melissa Tracey

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine, writing about home & design trends, technology, and sales and marketing. She manages the magazine's award-winning Styled, Staged & Sold blog.

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Comments
  1. REALTOR Magazine Online recently created an online foreclosure quiz so you can test your knowledge about foreclosures: click here to take the quiz.

  2. In addition to RealtyTrac, CA Realtor’s should check out ForeclosureRadar.com. It is exclusive to California, and was designed with Realtor’s in mind. Think of it as the MLS for foreclosures. It is also the only site that tracks every foreclosure auction in the state, so it is great tool to keep up to date on the status of specific properties.

    Sean O’Toole
    Broker and Founder ForeclosureRadar.com

  3. Heidi Metz

    Do you know of any websites that offer similar foreclosure information for the Phoenix market? Armls?
    Thank you.

  4. Donna Troupe

    Do you find that Realty Trac is a vlaid site, and that the information obtained is accurate and in realtime. I have found the information incomplete and outdated the last time I used the site, which was2 years ago. Has it improved?

  5. Ray

    I found this information very useful!

  6. Vicki Mackler

    I am surprised that anyone would recommend Realty Trac, especially an author who is supposed to be extremely knowledgeable. Their information is very poor, outdated and misleading. Not only that, never offer them your credit card for a free trial period. It will get charged even though you gave them notice within the appropriate time. Not only that, they make it impossible to get your money back. There are many more credible sources than that horrible website

  7. NATHAN MERMELSTEIN

    REALTY TRAC IS VERY UNRELIABLE.

  8. Sean is correct. He provides solid data as well specificially for California which of course carries a large amount of foreclosure activity. I would put his site as one of the Top 3 in the country.

    Donna, Vicki, and Nathan:

    Much has changed in the last 2 years. We looked at hundreds of companies; overall they had the best algorithms and data, and had national coverage, which like NAR is extremely important. Are they perfect? No, few people or companies are, but they are adamant about constantly updating and improving their data.

    It has served me extremely well in researching market trends, investments, etc. As a matter of record, several realtors I work with use their data as a complement to their MLS data, not as a competitor.

  9. Karen Caskey

    Hi,
    I worked for Wells Fargo ande Bank of America for the last 6 years as a loan officer. I attended an annual event in San Diego where a guest panel of California’s most successful producers gave advice on how to become a success. One of the speakers has the same name as the author and owner Bill, I am not easily impressed and this person impressed me immensely. would like to know if was Bill in San Diego Calif by the same name. I am an investor now and want to bird dog in Santa Clarita and San Fernando Valley.

  10. Yes Karen that was me..only one Bill Nazur out there! I hope……

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  12. Saving could be the hardest thing to do in these times, but now is the best time to become debt free! Hopefully we will all learn from these perilous economic times, and not get into debt so easily in future.

  13. I need some help quick Probably need to find some money to pay off debts soon.

    Would a fast payday loan onlinehelp?

  14. CJ

    Realty Trac is outdated.

  15. IRMA LONDONO

    Que hago si nadie me responde la oferta? que hago si el realtor me dice que ya hay muchas ofertas que no pierda tiempo mandando una mas? como se si el realtor entrego la oferta al banco?

  16. Irma, tienes que tener confianza en tu Realtor. Si saben lo que estan haciendo, te han dado esas repuestas porque saben lo que hacen y no quieren que gastes tu tiempo. Hay muchos compradores con expectativas que son irreal. Claro que tienes que evaluar si tienen esa experiencia y si no estas satisfecha siempre puedes dicerles adios y consiguir otro.
    Transalation: Irma, you have to have confidence in your Realtor. If they are giving you those responses, its because they are experienced and know what they are talking about. There are lots of buyers out there with unrealistic expectations and Realtors don’t want to waste your time putting in offers when they know it won’t work. Of course you do have to evaluate your realtor to see if they have the right experience and if you are not satisfied, you can always say goodbye and find another Realtor. Best wishes.

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