The flood of foreclosure properties at all price points may be giving inexperienced buyers and real estate practitioners the impression that homes can be bought for a song, quickly fixed up, and flipped for enormous profits. That couldn’t be more wrong, said foreclosure expert Frank Mears, ABR®, CRB, GRI, of Augusta, GA.
Finding lucrative opportunities in the REO foreclosure market requires patience, diligence, and a lot of homework. “Some houses look OK from the street, but are disasters on the inside,” Mears said. “You and your buyers need to inspect these properties, especially because REOs are usually being sold ‘as-is’.”
After proper legal notices, the next step in a foreclosure is typically a courthouse auction. Interested real estate professionals should contact whomever is in charge of the auction and find out what documents a buyer must bring to the proceedings. It’s wise to have on hand an assortment of cashier’s checks in various denominations to cover bid amounts since most foreclosure auctions are cash only. “Don’t bid if you don’t have the money on you,” Mears said. It’s also important to visit auctions in your area several times before you bid to learn the procedures. If you are representing a buyer, make sure to have a written buyer- brokerage agreement that includes provisions for your compensation. “You don’t want to do this for free,” says Mears. “And the auctioneer isn’t going to pay you.”
How to Get the Listing
If a property doesn’t sell at auction and joins the inventory owned by a lender, there are several important ways to position yourself to obtain that listing.
- Only contact lenders if you are serious about taking on REO properties.
- Be willing to do whatever it takes for the lender, including handling evictions, securing the property, handling trash, and undertaking any necessary maintenance. Follow through with what you agree to do.
- Make sure you have the cash flow to manage a property’s carrying costs. The lag time before a lender reimburses you could be significant.
- Show eagerness to take on less appealing properties as well as good ones.
- Find out when the lender’s fiscal year ends. It may be more flexible on pricing toward the end of this period because it doesn’t want to start the new year with a large carry-over inventory.
Reprinted with permission from REALTOR® Magazine Online, November 20, 2007.
Related posts:
© 2009