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RealtyTrac,Inc., the leading online marketplace for foreclosure properties, provides all the resources that home seekers, investors and realtor's need to locate, evaluate and buy properties at below market value. Founded in 1996, RealtyTrac sets a new standard for online real estate services by offering the largest database of pre-foreclosure and foreclosure properties, with more than 650,000 properties across the country, comprehensive property data, productivity tools and extensive professional resources. RealtyTrac hosts close to 2 million unique visitors monthly, and is the exclusive foreclosure data provider to AOL, HomeGain, MSN House and Home, The Wall Street Journal Real Estate Journal and Yahoo! Real Estate.
Fetching RSS feed... please stand byBuying a Foreclosure Property Below Market
Buying a Foreclosure Property Below Market Value: Five Tips from the Pros
House hunting can be a very daunting experience, especially in today's real estate market. Both investors and home buyers have been priced out of the market by escalating costs, and good real estate deals are increasingly difficult to find.
But there are bargains out there, for people who know where to look.
"For people willing to do some homework, the foreclosure market offers some of the best opportunities in real estate today," explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace.
Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, home buyers can use these services to assist them identify and research potential home purchases, as well as the tools and professional resources they need to help them close the deal.
With interest rates ticking up and ARMs adjusting upward, experts predict an increase in the number of foreclosure properties on the market. RealtyTrac, which provides all the foreclosure data for both MSN House and Home and Yahoo! Real Estate, has already compiled a list of over 550,000 foreclosure properties across the country.
"Foreclosure properties can be a terrific investment, or give home buyers a much more affordable option than traditional properties," notes Saccacio. "But they're not a way to get rich quick, and a foreclosure purchase needs to be approached in an educated, intelligent manner."
Saccacio offers five tips to help you close a deal on a foreclosure property:
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properties, and the foreclosure process.
There are three basic types of foreclosure properties, representing
different stages in the foreclosure process: notice-of-default
(NOD) and notice of trustee sale (NTS), which are both pre-foreclosure
properties; and real-estate-owned (REO), a foreclosure property
which has been re-purchased by the bank.
For most consumers, buying a pre-foreclosure property from
a private homeowner is the best option. It's important that
both the buyer and the seller see the situation as a win-win
situation, in order to ensure a smooth process. In this case,
the seller is able to get out from under a mortgage without
destroying their credit rating, the lender is saved the time
and expense of foreclosing on the property, and the buyer
gets a below-market price on a home.
Foreclosure auction sales are typically the domain of the
professional investor. These properties are formally in default,
and sold to the highest bidder at an auction. Buyers are required
to be physically present at the auction, and must pay 100%
of the sale price in cash, on the spot. Though foreclosure
auctions can offer significant savings, they are not for the
feint of heart or the uninformed. Unless the buyer is already
familiar with a particular property, there is usually little
time to examine it. And the buyer will be competing against
professional investors-and sometimes even the lender-at the
auction.
Once the lender officially reclaims a home, it becomes a real-estate-owned
property (REO). While REO properties typically offer more
time for evaluation and a more standard bank-managed transaction,
their prices are usually very close to full retail market
value.
CHART: Stages of the foreclosure process Stage Positive Negative
Pre-foreclosure: Notice-of-Default, Notice-of-Trustee Sale
- Highest potential savings - Potential win/win scenario benefits
all parties - Chance to evaluate property - Buyer / Seller
negotiations can be difficult\ - Time pressure to complete
transaction before auction Foreclosure: Auction sale - High
potential savings - Immediate property ownership - 100% of
the sale price required in cash - No time to evaluate property
- Competing with professionals Foreclosure: Real Estate Owned
(REO) - Affords significant time to evaluate property - Traditional
bank financing - Lender often rehabs property - Lowest potential
savings.
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Secure Your Financing
It's important for a buyer to be pre-qualified before engaging
in discussions with a seller. This ensures that the buyer
is in a financial position to purchase the property, and is
in the strongest possible position to negotiate. It's best
to work with a lender who understands the foreclosure process,
and can guide the buyer through certain steps, such as ensuring
that a property is FHA-compliant. Another reason to consider
pre-qualification is that not all lenders finance foreclosure
properties. Having approved financing in-hand makes negotiations
with both the seller and the lender easier, and may even make
it possible for the buyer to simply cure the default and take
over the existing loan to reduce loan processing fees.
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<b>Engage a real estate agent</b>
Most people hire a real estate agent to sell their home. These
"seller's representatives" are charged with making the sale
and negotiating the best deal for their clients. "Buyer's
representatives" have the home buyer's interests at heart,
and are charged with finding the right property and negotiating
the best price for their clients. Picking the right real estate
agent will make a buyer's life much easier. There are agents
who specialize in the foreclosure market, with specific experience
in REO properties. Look for an agent with foreclosure transaction
experience, as well as knowledge of local, regional and state
laws. But it's also important to consider the agent's knowledge
of the area; their ability to close a deal; and their access
to other professionals (attorneys, lenders, mortgage and title
professionals) to ensure that the buyer is in good hands.
Real Estate Time BOMB. Foreclosures and the Collapse of the Real Estate Market
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Do Your Homework
4. Do your homework
Stocks offer higher potential returns for investors than traditional
savings programs, but are also riskier. Similarly, purchasing
foreclosure properties is somewhat more risky than buying
traditional real estate properties, but offer much higher
potential savings. With the right examination and due diligence,
buyers can significantly reduce the risks. It makes sense
to give any property under consideration a thorough examination.
Here are eight steps for doing a professional-level exam.
CHART: Examination process steps
· Identify desirable neighborhoods - Identify specific neighborhoods
where you'd like to live or own a home. This will limit your
search to a manageable size for you and your real estate agent,
and give your a sense of relative property values.
· Cast a wide net - There are a number of Web-based services
that can put hundreds of thousands of foreclosure properties
at your fingertips. Since the best savings are often found
in pre-foreclosure properties, it's important to check the
percentage of pre-foreclosure (vs. REO) properties in any
database before subscribing.
· Determine the property value -Look at the original purchase
price, and recent comparable property sales to determine the
current value of the property.
· Find out the amount in default and the remaining loan balance
- In order to determine a reasonable offer price, you'll need
to know-at a minimum-how much money it will take just to satisfy
the debt to the lender.
· Run a legal investing report - Before purchasing any foreclosure
property, make sure it is free and clear of any bankruptcies,
tax liens or other financial liabilities.
· Assess the condition of the property- If at all possible,
visit the property, ask your realtor's opinion, and review
pest and structural reports to make sure that the property
is in acceptable condition, or to determine how much of a
rehab budget you'll need to build in to your deal.
· Build a positive relationship with the seller - Before
purchasing the property, try to make sure that you're entering
into a win-win situation with the seller, so that they'll
do what they can to make the process easier and leave the
property in good condition
· Leverage your timing - Knowing when a property is going
to be auctioned gives you an extra bargaining chip when negotiating
with the seller or the lender.
Make a Realistic Offer.
5. Make a realistic offer
Despite what you may see on late-night cable TV, investing
in foreclosure properties isn't a sure fire "get rich quick"
formula. Lenders aren't likely to give properties away, particularly
in a real estate market where prices continue to rise. And
homeowners in financial distress may be difficult to deal
with, particularly early in the foreclosure process. The keys
to a successful foreclosure property purchase are diligence
and patience. As a rule of thumb, the best savings can be
made at the pre-foreclosure stage, where home owners can avoid
a foreclosure and lenders can save the time and cost involved
in going through the process.
Another critical point in the process is immediately prior
to the auction date, when all parties might be most open to
a last-minute solution. It's not unusual to save from 10-30%
of the market value on a foreclosure property, and certain
properties offer savings of 50% or even more. An educated
buyer-one who knows how much is owed on the property and what
its market value is-can usually come up with a realistic offer;
one that offers significant savings, while meeting the requirements
of the lender.
Now go out and familiarize yourself with the resources and
tools available to take advantage of the opportunities offered
by this formerly-hidden real estate market. With the experts
pointing toward significant growth in available foreclosure
properties, there's never been a better time to line up your
resources and get informed.
RealtyTrac
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