Many data source related to the housing market revealed an uncomfortable truth: “In many ways buying foreclosed Home is truly a gold mine for real estate investor. Or any other person who wants to jump into the game and make a profit on real estate investment.”
Read a statement like that is cool. But many questions might pop up in the reader’s mind such as:
What a person should do to put his hands on Foreclosed Home?
How to profit from a Foreclosed Home deal?
If you have these questions in your mind by reading this article. It’s certainly you are one of the most clever people in America. Because you are part of the élite, the two percent group in this country who went to build wealth using real estate as a vehicle.
- Nonetheless, why should you consider buying Foreclosed Home as your next goal to climb the stairs toward wealth?
- Why should I choose this vehicle as a strategy to become financially free?
Write down on a piece of paper “ My big why!” is:
- Foreclosed Home happened every day, in every county, city, state, and township nationwide. It is a constant market full of opportunities.
- Purchasing a foreclosed home is perfectly different from buying a wholesale deal. This type of transaction as is own procedure to follow and can generate a lot of profits.
- Foreclosure houses or REO are a discount piece of real estate you can buy low and resale high and exit from the deal with a trunk of money in your pocket in less than 60 days.
Now you understand the Big Why. I must tell you this process need certain skill level. This type of knowledge is not difficult to learn. If you dedicate time and effort to learn it and execute it. Regardless of how smart are you or if you are totally not smart at all. This condition applied to anyone despite is educational background, ethnicity, color or gender.
The learning process is the fundamental step to acquire before you become an important player in foreclosure acquisition. Keeping in mind as real estate investor main goal is to buy Foreclosed Home. After that flip them on the market for profit. Repeat this process along the years to maximize capital and build wealth.
Meanwhile, I share with you, 5 important tricks to know that will help you buy and sale Foreclosed Home. Applied and duplicated them in your life every day and “the successful entrepreneur will become your nickname”.
Let’s start quickly by answered what is Foreclosed Home?
A foreclosed home is REO in most case scenario. That’s mean a piece of real estate that hit the housing market with only one real estate agent is involved. In a case like that the seller is more flexible to sell to real estate investor. Or to any potential buyer who can show the seller a proof of fund as soon as possible take action to close the deal in less than 30 days.
However, It is important to notice this type of deal must seal quickly on a short period. So there is narrow room for a long negotiation. Whenever you run the numbers in your dal analysis. You should go ahead as fast as you can.
A foreclosed home deal is selling as-is with no home inspection earlier. All repair cost is on the buyer after closing. This is a risky business if you are a beginner. I recommend you go looking for advice from some general contractor and other investors before you start.
Generally speaking, someone who knows the neighborhood and where to find foreclosed home quickly. A person you can benefit from his or her ability before you close your first deal. The easier side of buying a foreclosed home is most of the time this type of deal is bank-owned property ou REO.
This type of property is often vacant in good shape. Sometimes, you will find property in bad shape in a bad neighborhood. Or some property that just needs a cosmetic touch-up it depends on your investing strategy.
Nonetheless, buying a foreclosed home is not either difficult easy or neither easy. It all depends on you as an investor by the way you behave in the housing market. According to my personal experience, a person can turn foreclosed home in any neighborhood into a profitable deal. If you find the perfect broker before you even start.
Because to find a great foreclosed home deal with fantastic pricing. Definitely, you will have to analyze and going through different houses. At the same time writing and send different creative offers to get home, you want to buy.
However, if you understand the market, and applied these 5 discipline techniques you will get success. Learn them and apply them in your investment capital venture under my leitmotiv formula: “persistence + discipline = success.”
1. Make a realty broker and a lender become your close friend!
Because buying foreclosed home starts with two basics simultaneously. Which is Find a real-estate broker who works directly with banks selling REO. You should always get a proof of fund from a pre-approval lender ready in your pocket.
Whenever you choose to buy foreclosed home, you might find the term REO which is an acronym stands for “Real Estate Owned” property. The owner can be a bank, a broker, a mortgage company, an insurance company, a trustee, an acquisition firm, a real estate liquidator entity and more.
Guess who represent these type of institution in foreclosed home market: A broker or A Real Estate Attorney who act also as a broker and liquidator.
The common goal through the foreclosed home market is not to find a house; it’s to find the perfect broker. Banks usually hire a few real-estate brokers to handle their property portfolio for them on the marketplace.
A real estate investor should work with the bank’s broker instead of using a buyer’s agent. That way, the commission doesn’t have to be split between two brokers. “A lot of these brokers have a long-term relationship with these banks, and they know of listings that haven’t even come on the list yet.”
Team up with an REO broker is getting access to the shadow list of foreclosed home listings a week before a listing actually publishes on the MLS database. An REO Broker on your power team gives you access to an incredible loan to structure an amazing deal where thousands of foreclosed properties are for sale.
Even if you decide to hold the property for rental a broker on your team will give you access to capital to refinance the property. Give this broker exclusivity on your deal make him or her act also on your side, is a win-win situation.
3. Get a pre-approval letter
Unless you plan to pay cash, you’ll need a recent pre-approval letter from a lender. The letter will describe how much money you can borrow, based upon the lender’s assessment of your credit score and income.
Traditional buyers want to find the house first, and then they think they’ll work out the financing. But the problem is, the really good deals on these bank-owned, they go away quickly. Because the seller doesn’t necessarily have time to work out financing process with you. The seller needs you to take care of that on the first hand before starting negotiated with you.
In many cases, real estate investor beginner made the mistake of assuming the bank who selling a property to them will also finance a mortgage for the house as part of the deal. This possible but not often and to you will not get this opportunity easy. Until you have REO broker, a mortgage lender on your power team who got access to capital connection 24/7.
4. Get a discount price!
The first thing to remember, in buying a foreclosed home is pricing depends on the market value and the location. Because there is no rule on what the bank’s bottom line price is. Buying REO is just as with any other real-estate deal.
You should run the numbers, looks at the recent sales prices in your market. Compare the property you want to buy with other properties, with the same criteria in 2 miles radius. Sometimes the bank prices the homes really low such as 50 % to 60% lower of the market value. But, deals like that will receive multiple offers within hours only a broker on your team can help get them.
Sporadically, foreclosed home priced can be too high. As a result, nobody made an offer on them. This type of deal may stay on the MLS for more than 150 days. Your job is to check this type of deal and made an offer for 50% less of the listing price at the beginning of the month to the broker.
Often, you will get the deal because you may be the only one potential buyer. The other reason is people are superstitious they believe in good luck. The bottom line is; most of the broker will not turn down the first offer received during the beginning of a mouth. Especially on a sleeping REO deal on the MLS, no these brokers want to start the month with at least on deal sealed.
5. All repair discount is on you!
This market required in 85% case some repairs cost. Nevertheless, keep in mind that foreclosed home is sold as is. So all repairs cost is on you. However, to avoid mistake create 15% credit room off the purchasing price in your negotiation offer as repairs cost.