I am curious about your views of buying properties from the owner before the auction. Aside from the cost, complexity and urgency of uncovering all the unknowns, it appears that pre-foreclosure deals can be quite lucrative…some property owners are simply willing to give you their house to get out from under and avoid the foreclosure. What I have found thus far is that oftentimes properties are heavily burdened with mortgages (firsts, seconds and even thirds)…as in no equity and carrying other liens; i.e. delinquent taxes. Knowing when to walk away is key. For as long as you do your homework and know when to pass on a deal, I am thinking that pre-foreclosures is a great area in which to specialize. The difficulty I have found with REOs as a beginner is the added cost/process of an intermediary; i.e. a real estate agent. I would prefer to deal directly with the bank; in many if not most cases that opportunity is mitigated by the property being listed with an agent. Please know that these are rookie observations; I am new at this, so my interest is driven by a desire for ongoing education. Your views and input are highly valued. Thanks!
I’m a newbie at REI. In fact I will be closing on my first NMD property a 3 br condo already rented with a net cash flow of over $125 per month. Not spectacular but good for a start. My question…I know of a REO property on my street- nice neighborhood - suburb of Cleveland OH, the bank is selling it at $62K. I know the average market value of homes in our area range from $95K to over $125M. On the onset this seems like a good opportunity. How do I proceed or should I proceed since I’ve read that buying foreclosures are not for “newbies”. Would like to pursue, but not sure of next steps other than calling the bank/atty for which I do have the name and number. Your thoughts?
I recommend against beginners starting with foreclosures. There are a lot of dangers lurking in the foreclosure field, ready to grab all of your money and make you miserable.
However, I most strongly against buying at the auction and somewhat less strongly against buying from the property owners before the auction. I feel that REO buying is the safest of the three ways to buy foreclosures, and thus can be used by the beginner. Cautiously, of course.
This sounds like a very good to great deal. I’d suggest that you immediately put in an offer at either their asking price or about 8% below their asking price. Have a contingency in the sales agreement that allows you to “inspect the property with contractors, roofers, termite workers, house inspectors, soils engineers, or other appropriate professionals who are knowledgeable about houses.” And you can withdraw from the purchase agreement if you are unsatisfied with the results of such inspections and have any money you have already put up returned to you.
Then do your due diligence. There is an old saying “You don’t steal in slow motion.” Get the property tied up, then do your investigations to be sure you want to go ahead with the purchase.