If someone is about to lose their home to foreclosure, then you can guarantee they're feeling stressed. They're probably being bombarded by calls and letters from creditors, and for many people it all becomes too much to handle. They close their eyes and hope it will all just go away. Reality is that it won't, and as an investor interested in buying foreclosures, the hardest part can be convincing the homeowner that they really are going to lose their house unless they do something about it. It can also be difficult to convince them that you really are trying to help them, even though you are helping yourself make a profit at the same time. When you're dealing with foreclosures, time is of the utmost importance. You need to have enough time to bail out the homeowner and take over the property before it's too late. That's why it can be a good idea to subscribe to a foreclosure listing service - you get access to listings at the earliest possible time, and don't have to use your valuable time looking for potential foreclosure properties from other sources. Many people facing foreclosure have spoken to an attorney, and are convinced that bankruptcy is their only option. In most cases this isn't true, but attorneys tend to stick to what they're familiar with, which is bankruptcy, rather than mentioning other possibilities such as: - Sale by assumption - Deed in lieu - Straight sale - Foreclosure presale - Compromise sale - Short payoff - Workouts - Assignment - Injunctions There are still more options than these, which shows that bankruptcy definitely isn't the only choice for the homeowner. When you're dealing with a homeowner in foreclosure, make it clear that you're offering an alternative to bankruptcy. Find out whether they really understand what bankruptcy will do to their credit history and how it will affect their future. If you're serious about buying foreclosure properties, then you need to become familiar with everything that's required in the process, and check everything for every property you consider. These items include: - Loan and mortgage documents - Loan amount, monthly payment, and interest rate - Any outstanding taxes - Existing insurance policies - Any other liens or judgments Make sure you have enough information to complete all the necessary tasks before the foreclosure occurs. If there's not enough time, don't even bother starting. Having said that, learn as much as you can about ways to delay foreclosure, and help the homeowner to implement them all. If may just give you enough time to take over the property before the foreclosure auction. Above all, focus on creating a solution where everybody wins. It's never an easy time for the homeowner, so be prepared for plenty of anger, frustration and resentment - some of which may be directed at you. Walk away if it's obvious the person doesn't want to work with you. Find someone who is interested in finding a solution, show empathy for their situation, put together a strategy to get the best possible result for them, and before long you'll find yourself with a good portfolio of investment properties.
About The Author
David Jacobsen If you want to read more about foreclosures, click over to David's site at http://www.foreclosuresonlinecentral.com You can also access lists of seized real estate at http://www.buyingcheaphouses.info
Wednesday, February 21, 2007
Sunday, February 4, 2007
Flipping a Foreclosure
Buying low and selling high is the key phrase with real estate purchased for the purpose of flipping. The most important part of that phrase is "buying low". With a foreclosure there are three times a purchase can be made.
(1) Pre - foreclosure, when, or before the homeowner has been notified by the bank that because they are behind with payments the mortgage company is requiring a financial solution to be worked out that is acceptable to them, or to pay the loan off.
(2) At the auction, or commonly called "at the courthouse steps".
(3) Or an REO property which means real estate owned. REO is what the bank calls the property, when they have gotten the property back, because it was not purchased at the auction.
The common problem with a foreclosure is that because lenders have had available 100% financing, or ARM’s which is short for adjustable rate mortgage, or allowed lower income qualification, and higher debt allowances, there is very little equity in 95% of the foreclosures. With a tight budget a for a homeowner, any little, or big change in their family budget can spell disaster for their mortgage payments. Therefore if foreclosure comes, there is very little equity in the property. Sometimes there is so little, that if the owner wants to hire a real estate agent to sell their property, they would have to pay the agent "out of pocket". This is further complicated by the fact that the owner probably does not have the cash, because they are in foreclosure.
During the pre foreclosure stage, sometimes a homeowner is in denial, or thinks they will be able to sell for a big profit, or thinks they will win the lottery. When this is the case they often will not allow an investor to purchase the home. At the auction the opening bid is usually what the bank is owed, plus late payments, and late fees, plus attorney fees. A home with very little equity, could well be over the market price when all that is added, even though repairs are needed. The last stage is the bank listing the home through a real estate agent, and trying to sell it in the competitive market. Many times it will be listed at full retail price of other homes in the neighborhood that may be in tip top shape. Just because a home is a foreclosure home, or bank owned home does not mean it is a bargain. There are other things to be beware of, such as liens, and 2nd mortgages. At the auction most liens are wiped out, but not Federal tax, or if it was the second mortgage that went into foreclosure, the 1st position mortgage is still due. There are other strategies of working with the homeowner in distress, and with the bank that an experienced real estate investor can use. These are too lengthy to explain under this title.
To flip a house and make a profit you need the price you buy the property for to be 65 to 70% of ARV (after repaired value). In that percentage you need to include the cost of closing fees on financing, and the cost of repairs, not just the cost of the property. Most often things that will be estimated in error are the repairs. The estimation is often too low, either by the repair labor or material costing more than expected, or by missing some important repairs or replacements like needing a new roof, or a termite infestation. A temptation I often face is to upgrade, or add some things to the rehab that I think will really sell the property, but I failed to include in the original estimation. Most of the time, a regular lender will not lend the sale price plus the repair money to a real estate investor. There are lenders called "hard money" lenders. These lenders are where most investors go to get short term money including repair money at a rate of 13-18%. But the loan is for the 65 to 70% of ARV that I mentioned above.
Now you have purchased the property. You already have your list of repairs, and costs. Are you going to do the work yourself, or hire it done? I like to do the work myself, and sometimes do, if the list is not too extensive. However, time is money. Can you really save money by doing it yourself, when it may take you three times longer than hiring it done? Sometimes I hire most of it done, but reserve a few projects that I like to do, and are really expensive to have done. One example is ceramic or stone tile. I like doing it, and can save at the minimum $5.00 a square foot. If you hire contractors, handymen, etc., be sure you have several estimates to choose from, and make sure they can show up for the time you have allotted to start and finish the job. Again time is money. If you have to wait two weeks for them to come, it is costing you money. While working on the house you still have to pay mortgage payments, and builder’s hazard insurance.
What should you do to the house? First of all, plan on the necessary repairs needed to make the house sound, and livable. Things such as roof, and plumbing, electric, HVAC are first on the list. Fresh paint is a must. Choose a neutral color. All the rooms painted the same color make the house appear larger. For cosmetic upgrades, concentrate on the kitchen, and baths. Use hardwood, or ceramic tile, and new carpeting to give a solid, and plush look. Especially hardwood, and ceramic tile will add value to the home for the appraisal. New appliances in the kitchen give a polished look. New faucets throughout, and new switch, and outlet plates are two fairly low cost items that help give the new look.
You are now almost done with the rehab. Start your marketing now. In doing the rehab, take care of any exterior fixes, and upgrades, including landscaping first. This is so you can take a nice picture of the outside for advertising purposes. You can add other pictures of the inside as the rooms are completed. Assuming you have chosen a neighborhood that most of the houses are appealing, and well kept, this first impression will go far. When prospective purchasers call, have them drive by the home and see the outside and the neighborhood first. Also tell them the date of your first open house, or make an appointment with them to see the home at your finish date. It is a good strategy to schedule more than one appointment at about 15 to 30 minutes apart.. This creates an urgency to decide.
If you sell the house before 90 days FHA loans are hard to get because of the ruling in mid 2003. It was called anti flipping law. The prospective purchaser can go to a non-conforming loan. A list of repairs, and copy of receipts to give to the prospective lender is an important document to use. Mortgage lenders that specialize in investor loans, often can help the end purchaser in getting a loan. Also, a short term lease option with a prospective owner that qualifies for financing is an option. It could be for three to six months, and take it past the time required by some lenders.
The house is sold. Have you made $50,000, $30,000, or just a couple thousand, because of misjudgments. It is commonly said with real estate investing , "Do not quit your day job." Although it can become your full time job, you will have to go through a learning curve when actually doing projects. You will learn through mistakes. Beginners, and seasoned investors can make mistakes, and in the real estate investing business they can be costly.
Kathleen Couch who also goes by the pen name of Purple Leaf has written a variety of articles. She has gained expertise in many areas by having rich and fulfilling life experiences. You may read more of her articles at this site: http://www.helium.com/user/show/32788
Article Source: http://EzineArticles.com/?expert=Kathleen_Couch
(1) Pre - foreclosure, when, or before the homeowner has been notified by the bank that because they are behind with payments the mortgage company is requiring a financial solution to be worked out that is acceptable to them, or to pay the loan off.
(2) At the auction, or commonly called "at the courthouse steps".
(3) Or an REO property which means real estate owned. REO is what the bank calls the property, when they have gotten the property back, because it was not purchased at the auction.
The common problem with a foreclosure is that because lenders have had available 100% financing, or ARM’s which is short for adjustable rate mortgage, or allowed lower income qualification, and higher debt allowances, there is very little equity in 95% of the foreclosures. With a tight budget a for a homeowner, any little, or big change in their family budget can spell disaster for their mortgage payments. Therefore if foreclosure comes, there is very little equity in the property. Sometimes there is so little, that if the owner wants to hire a real estate agent to sell their property, they would have to pay the agent "out of pocket". This is further complicated by the fact that the owner probably does not have the cash, because they are in foreclosure.
During the pre foreclosure stage, sometimes a homeowner is in denial, or thinks they will be able to sell for a big profit, or thinks they will win the lottery. When this is the case they often will not allow an investor to purchase the home. At the auction the opening bid is usually what the bank is owed, plus late payments, and late fees, plus attorney fees. A home with very little equity, could well be over the market price when all that is added, even though repairs are needed. The last stage is the bank listing the home through a real estate agent, and trying to sell it in the competitive market. Many times it will be listed at full retail price of other homes in the neighborhood that may be in tip top shape. Just because a home is a foreclosure home, or bank owned home does not mean it is a bargain. There are other things to be beware of, such as liens, and 2nd mortgages. At the auction most liens are wiped out, but not Federal tax, or if it was the second mortgage that went into foreclosure, the 1st position mortgage is still due. There are other strategies of working with the homeowner in distress, and with the bank that an experienced real estate investor can use. These are too lengthy to explain under this title.
To flip a house and make a profit you need the price you buy the property for to be 65 to 70% of ARV (after repaired value). In that percentage you need to include the cost of closing fees on financing, and the cost of repairs, not just the cost of the property. Most often things that will be estimated in error are the repairs. The estimation is often too low, either by the repair labor or material costing more than expected, or by missing some important repairs or replacements like needing a new roof, or a termite infestation. A temptation I often face is to upgrade, or add some things to the rehab that I think will really sell the property, but I failed to include in the original estimation. Most of the time, a regular lender will not lend the sale price plus the repair money to a real estate investor. There are lenders called "hard money" lenders. These lenders are where most investors go to get short term money including repair money at a rate of 13-18%. But the loan is for the 65 to 70% of ARV that I mentioned above.
Now you have purchased the property. You already have your list of repairs, and costs. Are you going to do the work yourself, or hire it done? I like to do the work myself, and sometimes do, if the list is not too extensive. However, time is money. Can you really save money by doing it yourself, when it may take you three times longer than hiring it done? Sometimes I hire most of it done, but reserve a few projects that I like to do, and are really expensive to have done. One example is ceramic or stone tile. I like doing it, and can save at the minimum $5.00 a square foot. If you hire contractors, handymen, etc., be sure you have several estimates to choose from, and make sure they can show up for the time you have allotted to start and finish the job. Again time is money. If you have to wait two weeks for them to come, it is costing you money. While working on the house you still have to pay mortgage payments, and builder’s hazard insurance.
What should you do to the house? First of all, plan on the necessary repairs needed to make the house sound, and livable. Things such as roof, and plumbing, electric, HVAC are first on the list. Fresh paint is a must. Choose a neutral color. All the rooms painted the same color make the house appear larger. For cosmetic upgrades, concentrate on the kitchen, and baths. Use hardwood, or ceramic tile, and new carpeting to give a solid, and plush look. Especially hardwood, and ceramic tile will add value to the home for the appraisal. New appliances in the kitchen give a polished look. New faucets throughout, and new switch, and outlet plates are two fairly low cost items that help give the new look.
You are now almost done with the rehab. Start your marketing now. In doing the rehab, take care of any exterior fixes, and upgrades, including landscaping first. This is so you can take a nice picture of the outside for advertising purposes. You can add other pictures of the inside as the rooms are completed. Assuming you have chosen a neighborhood that most of the houses are appealing, and well kept, this first impression will go far. When prospective purchasers call, have them drive by the home and see the outside and the neighborhood first. Also tell them the date of your first open house, or make an appointment with them to see the home at your finish date. It is a good strategy to schedule more than one appointment at about 15 to 30 minutes apart.. This creates an urgency to decide.
If you sell the house before 90 days FHA loans are hard to get because of the ruling in mid 2003. It was called anti flipping law. The prospective purchaser can go to a non-conforming loan. A list of repairs, and copy of receipts to give to the prospective lender is an important document to use. Mortgage lenders that specialize in investor loans, often can help the end purchaser in getting a loan. Also, a short term lease option with a prospective owner that qualifies for financing is an option. It could be for three to six months, and take it past the time required by some lenders.
The house is sold. Have you made $50,000, $30,000, or just a couple thousand, because of misjudgments. It is commonly said with real estate investing , "Do not quit your day job." Although it can become your full time job, you will have to go through a learning curve when actually doing projects. You will learn through mistakes. Beginners, and seasoned investors can make mistakes, and in the real estate investing business they can be costly.
Kathleen Couch who also goes by the pen name of Purple Leaf has written a variety of articles. She has gained expertise in many areas by having rich and fulfilling life experiences. You may read more of her articles at this site: http://www.helium.com/user/show/32788
Article Source: http://EzineArticles.com/?expert=Kathleen_Couch
How To Stop a Foreclosure
Losing your house to a foreclosure can be very scary. There are times when circumstances are out of your control and your house ends up in foreclosure. However, there are things that can be done in order to stop a foreclosure from actually occurring.
Many people do not have a full understanding of their options when faced with a foreclosure. Nor, do they completely understand the overall process of foreclosure. Therefore, educating yourself on foreclosures is the first step in stopping a foreclosure.
Refinancing is usually the most obvious answer. On the surface, refinancing may seem like the perfect way to stop a foreclosure. However, many people who are facing foreclosure have less than perfect credit. Therefore, they are unable to obtain a loan with a reasonable interest rate.
Another problem people often have when facing foreclosure is that they have little or no equity in their house. So this makes it even more difficult to secure a refinance loan. Many people are then faced with the option of using a predatory type lender. Predatory lenders often come with astronomical interest rates and outrageous fees.
A retirement plan such as a 401K loan is another option. This type of loan is not a favored loan however. You can either take a loan out against your retirement plan or withdraw the money all together.
If you chose to withdraw the money, you will end up paying federal income tax, as well as a penalty tax. If you chose to withdraw the money, be sure to research it completely beforehand. That way, you are aware of exactly what you will end up paying.
When trying to stop a foreclosure, you could ultimately file bankruptcy. Depending on what type of bankruptcy you file, you may only slow down the foreclosure process versus actually stopping it. Reports indicate that nearly 96% of people who file bankruptcy to stop a foreclosure are still foreclosed on.
A viable, but less favored option is to sell your house. It may be the case that you can no longer afford the house you currently live in. So selling the home in order to stop a foreclosure is a great alternative. You can then either try to buy a house that is less expensive or rent. So, although you may dread selling your house and moving, if you don’t stop the foreclosure, you may be forced to anyway. Only this way, you are able to walk away from the home without a foreclosure looming over you.
No matter how you ended up facing a foreclosure, know that there is hope. Begin by educating yourself on the overall process. And most important, do not wait too long to take some type of action.
Article Source: http://EzineArticles.com/?expert=Peter_Pang
Many people do not have a full understanding of their options when faced with a foreclosure. Nor, do they completely understand the overall process of foreclosure. Therefore, educating yourself on foreclosures is the first step in stopping a foreclosure.
Refinancing is usually the most obvious answer. On the surface, refinancing may seem like the perfect way to stop a foreclosure. However, many people who are facing foreclosure have less than perfect credit. Therefore, they are unable to obtain a loan with a reasonable interest rate.
Another problem people often have when facing foreclosure is that they have little or no equity in their house. So this makes it even more difficult to secure a refinance loan. Many people are then faced with the option of using a predatory type lender. Predatory lenders often come with astronomical interest rates and outrageous fees.
A retirement plan such as a 401K loan is another option. This type of loan is not a favored loan however. You can either take a loan out against your retirement plan or withdraw the money all together.
If you chose to withdraw the money, you will end up paying federal income tax, as well as a penalty tax. If you chose to withdraw the money, be sure to research it completely beforehand. That way, you are aware of exactly what you will end up paying.
When trying to stop a foreclosure, you could ultimately file bankruptcy. Depending on what type of bankruptcy you file, you may only slow down the foreclosure process versus actually stopping it. Reports indicate that nearly 96% of people who file bankruptcy to stop a foreclosure are still foreclosed on.
A viable, but less favored option is to sell your house. It may be the case that you can no longer afford the house you currently live in. So selling the home in order to stop a foreclosure is a great alternative. You can then either try to buy a house that is less expensive or rent. So, although you may dread selling your house and moving, if you don’t stop the foreclosure, you may be forced to anyway. Only this way, you are able to walk away from the home without a foreclosure looming over you.
No matter how you ended up facing a foreclosure, know that there is hope. Begin by educating yourself on the overall process. And most important, do not wait too long to take some type of action.
Article Source: http://EzineArticles.com/?expert=Peter_Pang
Important News On Home In Foreclosure
Many of us have faced hard times at some point in our lives. When we are going through it, it may feel overwhelming, like a hopeless situation. Once we have made it through, we are thankful to be left standing in one piece. A home in foreclosure can seem like the end of the world to someone going through it. No one wants to lose something they have worked hard to get; especially if it is something they love dearly. They may have put many man hours into the home by remodeling and upgrading it, and they may have lived in it for quite some time. The home may hold many family memories, and now they are going to lose the home to a foreclosure. This article will talk about some important news on a home in foreclosure, and how it may not quite be the end of the world.
Most of us like to be winners. It isn't much fun to lose. A home in foreclosure can make you feel defeated, like there is no hope. I'm here to tell you, not to give up. Don't go down without a fight. There may be some options that could possibly bail you out of this foreclosure. In some cases, there may not be any other option, but for many, just because you get a notice of foreclosure, doesn't mean it's all over. Find out what you can do to save your home. A home in foreclosure can sometimes be refinanced, if the equity is high enough in the home and you could begin making payments again. Who knows, with a refinance, you may even have lower payments. The first thing you need to do is make contact with the people who have begun foreclosure.
One of the first things many people do when they become financially behind is, avoid the constant phone calls. To save a home in foreclosure, it is a must to stay in contact with the original lenders. You need to let them know what is happening in your life, and any changes that may allow you to begin making payments again. Most lenders do not want the home back if at all possible. They will work with you all they can, to help you be able to keep your home in foreclosure. There are many times when you may have lost your job, or been laid off for a period of time, and have gotten behind on your payments. You were then able to get back to work, but just can't catch up the back payments. The lenders can take the back payments on a home in foreclosure and add them to the end of your loan.
Banks can be creative if they so choose. They really don't want a home in foreclosure, as it often costs them money. What ever you do in this situation, don't give up. Check out your options. You may want to consider a bill consolidation program that will lower your other monthly costs, in order to pay your mortgage payment. A home in foreclosure isn't the end of the world, but it could be an eye opener for someone who hasn't been managing their money wisely. You may need to get some counsel on how to manage your money, and consolidate your other bills. This could help you in further ventures to avoid another home in foreclosure.
If you need more Forclosure Help then quickly head over to http://foreclosure-help-now.com where you will find helpful foreclosure tips, advice and resources including information on foreclosure plans, negotiating and more Home In Foreclosure information.
Article Source: http://EzineArticles.com/?expert=Tom_Turner
Most of us like to be winners. It isn't much fun to lose. A home in foreclosure can make you feel defeated, like there is no hope. I'm here to tell you, not to give up. Don't go down without a fight. There may be some options that could possibly bail you out of this foreclosure. In some cases, there may not be any other option, but for many, just because you get a notice of foreclosure, doesn't mean it's all over. Find out what you can do to save your home. A home in foreclosure can sometimes be refinanced, if the equity is high enough in the home and you could begin making payments again. Who knows, with a refinance, you may even have lower payments. The first thing you need to do is make contact with the people who have begun foreclosure.
One of the first things many people do when they become financially behind is, avoid the constant phone calls. To save a home in foreclosure, it is a must to stay in contact with the original lenders. You need to let them know what is happening in your life, and any changes that may allow you to begin making payments again. Most lenders do not want the home back if at all possible. They will work with you all they can, to help you be able to keep your home in foreclosure. There are many times when you may have lost your job, or been laid off for a period of time, and have gotten behind on your payments. You were then able to get back to work, but just can't catch up the back payments. The lenders can take the back payments on a home in foreclosure and add them to the end of your loan.
Banks can be creative if they so choose. They really don't want a home in foreclosure, as it often costs them money. What ever you do in this situation, don't give up. Check out your options. You may want to consider a bill consolidation program that will lower your other monthly costs, in order to pay your mortgage payment. A home in foreclosure isn't the end of the world, but it could be an eye opener for someone who hasn't been managing their money wisely. You may need to get some counsel on how to manage your money, and consolidate your other bills. This could help you in further ventures to avoid another home in foreclosure.
If you need more Forclosure Help then quickly head over to http://foreclosure-help-now.com where you will find helpful foreclosure tips, advice and resources including information on foreclosure plans, negotiating and more Home In Foreclosure information.
Article Source: http://EzineArticles.com/?expert=Tom_Turner
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