| If you want to make money in real estate, buying and | | | | from roof, foundation or piping problems. Look for |
| selling foreclosed properties can be very profitable. | | | | properties that simply need new carpet, light |
| When a homeowner defaults on their loan, the bank | | | | landscaping, new countertops and paint. A local |
| repossesses the property and resells it. Banks make | | | | contractor can help you determine these costs. |
| money on the loan and lose money when holding | | | | If an REO is not selling quickly, a bank may consider a |
| properties, so they are very eager to sell once they | | | | short-sale - which means buying the property for less |
| are forced to foreclose. This can be a great | | | | than what was owed on it. As mentioned earlier, |
| opportunity for investors who are ready to buy. | | | | banks are not in the real estate business. They want |
| The first step in buying foreclosed properties is to be | | | | to sell REO's as quickly as possible. They may initially |
| prepared. You don't have to do this yourself. You can | | | | try to sell at market value, but if it doesn't sell after |
| find a broker who has significant experience with REO | | | | 30-60 days, they will lower the price. If it still doesn't sell, |
| properties to help you with your research. REO stands | | | | negotiate a short-sale. |
| for "real estate owned," which is how banks refer to | | | | Another option to consider is buying houses in |
| repossessed properties in their P&L statements. | | | | pre-foreclosure. Depending on the state laws, banks |
| Most banks prefer to deal directly with real estate | | | | are required to give the homeowner a window of time |
| brokers, instead of selling REO's to the general public. | | | | to sell their home before the foreclosure sale. This |
| Find out which real estate professionals work closely | | | | timeframe gives you an opportunity to contact the |
| with banks. One way to find this out is by contacting | | | | homeowner directly to purchase the property. In most |
| title companies and asking whom they recommend. | | | | cases, the homeowner is desperate to sell and may |
| A good real estate broker will also be able to | | | | accept an offer for slightly over the amount of their |
| determine if the REO is being sold at market value or | | | | loan. You can help the homeowner by giving them |
| less by bringing up "comps" - comparable properties | | | | enough to move on and repair their financial situation. |
| that have recently sold in the area. Sometimes banks | | | | Any good real estate deal will go quickly, especially |
| don't discount REO's right away when they put them | | | | foreclosures, so be prepared to move. You'll be able to |
| on the market. A broker will also help determine if the | | | | spot deals faster if you know the area's housing |
| location is desirable or not, which is important in any | | | | market. Be sure to have your real estate team of |
| real estate transaction. | | | | professionals ready also, including title companies, |
| Once you have found a property that you like, make | | | | brokers, and lenders. It is also recommended that you |
| sure it's really a good deal by ordering a professional | | | | educate yourself as much as possible and work with |
| home inspection. The best investments require simple | | | | a mentor before starting. |
| cosmetic work to be ready for resale. Stay away | | | | |