It isn't unusual for folks to contact me asking about buying distressed properties. Periodically, I bring out and dust off a great article written by Elyse-Umlauf-Garneau for the California Association of Realtors. It was written back in late 2007. But, the points made are as true today as when first written. It follows here:
Buying Distressed Properties
California Association of Realtors
Every cloud has a silver lining, and the rise in California home foreclosures is no exception. That's if you're an investor hunting for good deals.
Investing in foreclosures is no low-risk venture. You often need to act quickly, have ready cash to buy, and may need to earmark money for repairs to make properties sellable.
Here are some basics on buying distressed homes.
· Identify properties: Right now, choices are abundant. One way to locate homes is to register with foreclosure information services such as foreclosure.com or realtytrac.com.
Options to buy include:
· Short sales: When borrowers can't keep current with mortgage payments, some lenders agree to allow the sale of the property for less than the loan balance. Frequently, you can find such deals through real estate professionals representing troubled homeowners.
· Auctions: Auctions typically offer the best buys, but the risk to you is greater. You must research liens against the property and decide on your maximum bid price. You're also required to have cash on hand; remember, you're bidding on homes you haven't inspected and competition can be stiff.
· REOs: These are properties that have been taken back by banks. You can contact banks' REO or asset management departments to locate properties. Such homes are frequently listed in the multiple listing services, so REALTORS® can assist you with purchase. Unlike at auctions, you'll be able to inspect properties and banks may have made repairs to a home.
Before You Leap
Take seminars, visit Web sites, and read books before investing.
Do proper research. Check neighborhood comparable prices so you don't overpay.
You're inheriting previous owners' problems, so investigate other costs, such as liens and unpaid taxes that you could be responsible for.
Consult appropriate experts, such as lawyers, certified public accountants, and real estate professionals. REALTORS® can often locate and execute short sales, find REOs, and help you evaluate market conditions.
--Elyse Umlauf-Garneau is a freelance real estate writer