How to Buy a Home In Foreclosure!

Table of Contents

• How to Buy A Foreclosure?

• Buying a Foreclosure Can Get Complicated

• What is a Foreclosure?

  • How Many Ways are there to Foreclose on a Property?

• How To Find Foreclosures?

• The Three Phases of a Foreclosure

• Save Me From Foreclosure!

  • Preforeclosure (Phase One)

    • If The Foreclosed Owner Doesn't Settle Up Their Debt

  • Actual Foreclosure (Phase Two)

  • Post Foreclosure or REO (Real Estate Owned) (Phase Three)

• Putting in Your Offer

• Know your Numbers

• Conclusion

How to Buy a Foreclosure?

Buying a Foreclosure can be one of the best ways to get an incredible deal on a piece of real estate. Hello, I'm Mike Fagundes a Pastor at my church, entrepreneur, Investor, and philanthropist (P2G Found).

The best place to start in buying a foreclosure is to start with a purpose and it gives you a focus that can help you keep at it when times get tough. Example:

• “Why do you want to find and buy a foreclosure?

• Is it to live in that property for yourself?

• Do you plan to use it for an investment property?

  Whatever your reasoning behind wanting to read this post. I will do my best to make sure you come out from reading it. Knowing what you came here to learn.

Buying a Foreclosure Can Get Complicated

The world of buying foreclosed properties can get a little complicated. it's filled with legal jargon and Insiders Secrets. I wanna walk you through the process you need to find and purchase your next home or investment property from one of the best foreclosure list databases in the nation. Let's get started!

What is a Foreclosure?

Foreclosure, to define it.

Is where the lien holder or mortgagee (ex. the person who owns the note for the money that was borrowed for the purchase or refinance of the property) decided to start foreclosing on the property to take ownership of the property.

There can be more than a few reasons for a Foreclosure to take place.

But the most common is that the mortgagor (the borrower of the money or equity of the property and is responsible to pay that back on an agreed amount of time and interest rate laid out in a contract or note for the property) has failed to make on-time payments or completely missed and owes payments to the lien holder. The lien holder then starts the process of foreclosure.

How many ways are there to Foreclose on a property?

There are two main ways the foreclosure process is done through, there is the Judicial and the non-Judicial process (check with your state and county to see which is used where you live or are looking to invest in). The Judicial is longer and more costly than the non-Judicial, (more on that in another post) but both ways are effective and if done properly, legal ways for the lien holder to take the owner of the property and attempt to sell it to recover the funds that were owed by the borrower.

How To Find Foreclosures?

Here Are Four Ways to Find a Foreclosure

1. MLS (Multiple-Listing-Service

   • you can find some listings on Real Estate Portal sites Like:

     • Realtor.com

     • Zillow.com

     • Redfin.com

     • Trulia.com

     • but these lists can be delayed or sold already.

2. Buy Directly from a Bank's REO Department

3. The Hud Store (Housing Ud Home Store)

4. Foreclosure.com Is a membership site and one of the best to work with.

   • you get access to find:

     • Preforeclosure lists

     • Foreclosure auction listings with location times and dates of the auction

     • REO listings

     • Rent-to-Own Listings

     • They have Cheap Homes Listings

     • City Owned Listings

     • they have a page where you can see what rates you can get pre-qualified for putting in your offers.

     • And also list Tax Deed Sales listings of the properties.

     • and a video tutorial that can help you understand how to use their site to find a listing and put in your first offer.

You get all that and a great online support team to answer your questions about any listings. Now it's time to put in your offer after you have found a listing you're interested in and have a pre-approved loan to make it easier and quicker to close.

The Three Phases of a Foreclosure

The foreclosure process is usually a little different from state to state. I will divide this post into three phases to learn about the most commonly used industry terms used throughout the foreclosure process. This way you can stay on the same page with me and the banks or real estate agents/brokers that you work with. This way you can be seen by a bank and real estate agent(s) as a serious and knowledgeable investor and someone that they will want to work with now and in the future. The three (3) phases are preforeclosure, at the courthouse/property steps foreclosure auction, and after the foreclosure or better known in the industry as the R.E.O. (Real Estate Owned) property sales list.

Save Me From Foreclosure!

Preforeclosure (Phase One)

I will start with the preforeclosure process as phase one. This is the phase before the foreclosure actually happens and the homeowner before they are kicked out or evicted from the property. This is when someone has missed one or more payments and a bunch of notices (ex. lis pendens or Notice of Default) are sent to the property owners to catch up on their back payments.

This part of the foreclosure phase is where most investors like to get foreclosure properties. Because it is the lowest cost of entry for the property, the place where you can get the most equity in the property at purchase and help a motivated seller save their credit and help the owner of the property out. Noting in life are more motivating for a homeowner than knowing they’re going to be physically removed from their property and have their credit history destroyed for the next 7 to 10 years. See our future posts on how this process is best used.

If The Foreclosed Owner Doesn’t Settle Up Their Debt

If the owner doesn’t settle up their back payments to the lien holder, then we move to phase two of the foreclosure process. The actual sale at the Court House Steps/property (depending on the state).

Actual Foreclosure (Phase Two)

I GIVE YOU FAIR WARNING HERE…

The foreclosure auction sale is not for a new or novice investor. It’s more of an advanced technique and does take…

• Knowledge of the markets to know what a home like that would be worth.

• Knowledge of how much it would cost (to bake into your max offer) if the whole thing was stripped to the studs with no plumbing or wiring in the property and a bad roof or cracked or unstable foundation.

• A cool head to not get caught up in the excitement or rivalry to overbid the property above your max bid.

  • My dad once overbid a simple (not even signed by a famous soccer player) soccer ball that I mentioned to him that I would like. But there was a rival bidder that my dad wanted to prove something to and everyone around him that he ran up the bid to $300 for a simple $5.99 soccer ball just because he wanted to beat the other guy in the bid, not because of me.

If the courts have set an auction date and no preapproved agreements are accepted by the lien holder and/or the courts, then an auction will take place on the date and time set by the courts at “The Court House Steps” (this could be figuratively or literally depends on the state and county it’s being held in). The property will be sold to the highest bidder. The process is called in certain states as a Trust Deed sale.

The bidding starts at the amounts that are owed to pay back the lien holder what’s owed to them. Remaining balance on the note, the late payments, court fees, administration fees, etc. All fees and balances that are owed is where the minimum bidding starts.

Here is a list of all the things you need on the day of the auction.

• There’s no property walkthrough

  • You don’t get to see what the property looks like or what condition it is in.

  • If you win the property in the auction the property is often site unseen.

• There could still be other liens on the property in the second or third, etc. The position that you will be responsible for is because they too come with the property.

• All Cash Offers all that’s accepted on site

  • You can not bid on a property and then tell the courts that you need to get financing.

  • All offers are made in cash at the auction.

  • The cash can be in cashier checks/money orders/or bank checks.

  • Often made out in quantities of…

    • $100,000 dollar sums

    • $50,000 dollar sums

    • $10,000 dollar sums

    • $5,000 dollar sums

    • $1,000 dollar sums

    • $500 dollar sums

    • $100 dollar sums

Example:

If the property has a minimum bid of $54,300 and gets bud up to $167,300 then you will be using:

• 1 of the $100,000 cashier checks/money orders

• 1 of the $50,000 cashier checks/money orders

• 1 of the $10,000 cashier checks/money orders

• 1 of the $5,000 cashier checks/money orders

• 2 of the $1,000 cashier checks/money orders

• 3 of the $100 cashier checks/money orders

• to a grand total of $167,300 for your winning bid cash payment for the property.

If the property is not sold at the auction then it is given back to the lien holder/Bank and they list it with a Real Estate Agent/Realtor as an REO (Real Estate Owned) listing and starts the eviction process of the previous owner.

Post Foreclosure or REO (Real Estate Owned) (Phase Three)

The most common Phase that most people talk about when they say that they had bought a property on foreclosure is this one here. This is the easiest way to enter into a foreclosure deal. Here's a list of reasons why.

1. The property is listed publicly because the new owner (likely "The Bank" has listed the property with a real estate agent and you can make arrangements with the listing agent to view the property (in some cases).

2. if you have a real estate license or have a good friend as an agent you can get a list of properties from them off the MLS (Multiple-Listing-Service) that is if the Listing Agent isn't pocketing the listing for his customers to have first looks or for them to make an offer on the property themselves.

3. You have a starting price to negotiate with the bank for your offer.

4. The seller pays the closing costs so there is no cost to you.

Putting in Your Offer

Meet with your Amazingly Awesome Real Estate Agent to discuss what terms you want, the price, and the closing date on the property you want and submit an offer to the seller and follow up with it.

There are a few responses that the seller can make toward your offer, like:

• Accept it (Great)

• Ignore it or bring in a higher offer (Keep Following up)

• Deny it (try another offer)

• Counter and see how much you can give towards the property or work on terms and closing date.

Know your Numbers

Not all foreclosures are a great buy, it can be really easy to overprice in the auction or REO phases. this is where you and your Real Estate Agent should know what is and is not a good price, especially when repairs and holding costs will be a major factor after the purchase. This is why the preforeclosure phase is the lowest barrier of entry cost-wise to get into a foreclosure property.

Conclusion

Foreclosures whether it's in the Preforeclosure, Foreclosure Auction process, or REO can be some great buying opportunities. Some of the processes are not simple nor easy for the first timers or if you don't have the cash (foreclosure auction process) to buy or buy the right way.

Getting some education from a mentor or even a guided program like the HERO program our parent program runs would be the best way to get started. Click the link to preregister for the next classes to learn more. The program starts at just about $1.25 prepay and pays out a referral affiliate commission of 33% for the lifetime of the referral. That's right if you refer just 3 people, your admission is paid for in full every month, and the 4th or more and now you are one of our affiliates who earn while they learn.

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