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Investing in Foreclosures?
Old 05-07-2008, 08:01 PM   #1
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Investing in Foreclosures?

I know this has been raised previously, but I am wondering if anyone has made the jump and purchased a foreclosure? What did you do to educate yourself on the process?

I just logged onto foreclosurepoint.com to check out the foreclosure market in San Diego and I was shocked at how much is on in the vicinity of where I live. A lot of it is the dreaded condo conversions which were doomed for disaster.
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Old 05-07-2008, 09:01 PM   #2
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I have looked at some foreclosure listings just because I am in the market to buy my first place. Like you, I thought I could find some bargains. However, I have not been impressed with the list prices on some of those sites.

I think I have seen more attractive prices on homes that are in the pre-foreclose category and the owners are desperate to bail. I would prefer to go that route and avoid some of the red tape.

I just can't decide whether or not I want to start off in a house or a duplex.
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Old 05-09-2008, 07:03 AM   #3
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If the future is anything like to past cycle, banks will continue to take back properties as the reserve bids are not met. Now the fun begins ... make a low ball offer for the banks REO/OREO.

No real "education" to be had, just phone the local bank and ask for thier REO/OREO lists. The bank will be responsible to delivering a clear title. Often special financing packages are available to help move thier properties.

Of course everything is web-based now so the bank web site might help. But don't bother with some paid subscription to access REO listings. Thier info is old/inaccurate and a waste of time.

Some realtors specialize in bank owned properties. All this means is that they have a realationship with a specific bank and have exclusive listings. You might get pointed to this realtor (by the bank).
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Old 05-09-2008, 08:43 AM   #4
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I bought dozens of books on forclosure.... i got one message from all these book.

To learn you must act. Period.

Go for it
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Old 05-09-2008, 09:04 AM   #5
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So tyran is the list price often far from the actual on bank reos?
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Old 05-09-2008, 10:25 AM   #6
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The question is not as clear as it could be...

Are you talking about what we call here the 'sheriff sale'? That is the legal process of selling the foreclosure out from under the owner.... if this is what you mean.... nope... would not touch these....

If you are asking about a forclosed property that the bank now owns (REO), then YES...

I put in a bid on a house for a 'short sale'... but the guy went into bankruptcy prior to me getting a bid in and said he was not signing anything.... now, after 3 or so months... the bank and he came to an agreement so he was ready to sign... and the wife said "NO".. so now SHE is not signing.... so I wait and wait and wait...

HOPEFULLY, the bank will go through the process, foreclose and then sell it to me...
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Old 05-09-2008, 04:22 PM   #7
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Quote:

So tyran is the list price often far from the actual on bank reos?
All depends how long the bank has held it. I've been able to pick up REOs - on average - for 30-40% of whats owed/foreclosed. Most had tenants (aka problems) because the bank had carried it for a couple years (better to have a body in the unit and the heat ON). Need to be PATIENT ... asking/list prices are high (unsustainable by rents) because people are paying them. Also foreclosures have not peaked - yet - need a quarter or two where the numbers actually DROP.

Quote:

the 'sheriff sale'? That is the legal process of selling the foreclosure out from under the owner.... if this is what you mean.... nope... would not touch these....
Yeah, I don't bother with these. Price is what's owed. Who wants to pay THAT. If they had equity they would have SOLD the thing themselves.

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Couldn't have said it any better!
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Old 05-09-2008, 04:51 PM   #8
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brother & sil picked up 2.5-acre gentleman's ranch for $325k which last sold for the silly sum of $685k. it had sold for $410k in 2004. their price compounds out to 5.1%/annual from its 1976 price when the area (including the surrounding area) was completely undeveloped. looks to me that they got the property at a 2000/2002 price.

their main hassle was dealing with countrywide because both the previous owners likely scammed them out of $200k and because the mortage company was being investigated by the state of florida at that time. they were suspicious of my brother because the property hadn't been advertised. but we knew about the situation because that's where my niece's horse was bordered.

i would prefer selling out now and then vagabonding for 2 years before purchasing again (to maintain my save our home property tax advantage) though i might just repurchase right away to take advantage of the many foreclosures available. since i have to sell low, i might as well buy even lower.
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Old 05-09-2008, 04:52 PM   #9
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after partaking in buying a tax lien sale id never do any forclosure again. ever. the hidden pitfalls are amazing.... thankfully the guy we partnered with was a builder or we would have been screwed.

it took almost 2 years to evict the old owner. the eviction is seperate from the foreclosure process if they dont leave on time.. we had to spend ten thousand dollars in storage fees and moving men as they left their stuff behind when evicted.
law requires us to pay and store it for a period of time. they have to reimburse you to get their stuff back but when they dont claim it ,it cost you more money to dispose of it if you dont want to keep it or can sell it.

we had to pay loads of back taxes, pay the current taxes for 2 years trying to evict them.

they did enourmous damage to the house.

forget about it!
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Old 05-09-2008, 05:00 PM   #10
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Yeah, you gotta know you're getting a clean title.
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Old 05-09-2008, 08:38 PM   #11
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Well, there are two houses in my immediate hood that are in the foreclosure process. One made it to the sherrif's sale last week and now Countrywide owns it. It is not in great shape, but with 50 grand of work it would be a nice rental and eventual SFR sale when the market recovers. The other is in better shape but is still winding its way through the foreclosure process (NJ average is over 9 months).

We'll see where these get listed at once they are both REO and maybe I will bid accordingly. But the numbers would have to be real attractive (read: usuery), since I can buy any number of junk bonds at a 10+% spread to treasuries without lifting a finger.
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Old 05-10-2008, 01:21 PM   #12
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Does anyone have some foreclo websites they watch or visit to find prospects? If so, share the wealth.
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Old 05-10-2008, 01:26 PM   #13
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This is a good place to start: BiggerPockets.com Bank REOs - Locate Bank Owned REO properties & foreclosures - foreclosure.
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Old 05-10-2008, 02:30 PM   #14
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Here's the FDIC, Freddie and Fannie REO sites:

Fannie Mae-Owned Property Search

Home Steps , A Freddie Mac Unit: Feature Search

FDIC Real Estate for Sale
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Old 05-10-2008, 02:43 PM   #15
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I bought a foreclosure in 2006 but DW and I lived in it. We bought it of MLS from Fannie or some other government guarantee agency. The selling price was $160K but on foreclosed properties were going for $210K. The problem with this house was some of the ugliest wallpaper, tile and paint combinations ever devise. The carpet was ugly, there was mold all around the shower/tub area and it was obvious their dog wasn't housebroken very well. There was an electrical "issue" that I'm sure scared off a lot of buyers.

We put about $20K into it before we moved in. The whole interior was repainted, wall paper removed, carpet replaced and a lot of tile replaced/installed. In two years we moved and sold for $219K. We didn't exactly get rich off the deal but we essentially lived in the house for free.

When we moved I tried to find a similar fixer upper but couldn't find one we liked.

I don't tend to view owning rental property and flipping foreclosures as a viable retirement strategy but it can be used to increase your assets prior to retirement. The reason I don't like their use as a retirement strategy is that it takes a heck of a lot of work and knowledge to do it.
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