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7 Tips on Buying Foreclosed Property in South Florida

 

By Michael Humphries – Compass Roads Realty, Inc

 

We are seeing a new wave of REOs hitting the market, and the numbers don’t lie. According to the association of Realtors, distressed sales were up 36% in December 2012 compared to the year before.

If you’re looking to get into the foreclosure investment game, this may be the best time ever. But, to be a player you have to be well-informed, quick-on-your-feet and thick-skinned to make it in this fast paced, highly competitive arena.

RealtyTrac, which tracks nationwide foreclosure activity, released a report that REOs will rise in 2013 for a variety of reasons.  Foreclosure starts were up 20% in some major metros including areas in Florida reporting the highest annual percentage change in foreclosure activity to date!  This is a clear sign that more REOs are coming down the pipeline in the coming months.

REO stands for “real estate owned”, it is the term used to describe a property that is in the possession of a lender by virtue of foreclosure.

    1.   Understand the Foreclosure Process

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. It begins when a borrower/owner defaults on loan payments and the lender files a public default notice or a lis pendens (Latin for "lawsuit pending"), depending on the state.

    2.    Finding Foreclosure Properties

The easiest way to find foreclosures is to subscribe to online listing services or work with a real estate agent or lender. Some agents will agree to include you in their distribution list and notify you immediately when new listings come on the market. You can also look for notices of defaults and auctions in public records and local newspapers.

    3.   Contact a Real Estate Agent

If you're a first-time homebuyer and you've never purchased a home, let alone a foreclosure property, a good real estate agent can be a helpful resource and guide you through the process of buying a foreclosure and drawing up a purchase agreement. Make sure they know your priorities; a good agent can help you design a comprehensive business plan that’s tailored just for you.

    4.   Do the Math

Calculate how much you'll need to sink into the property, outside of mortgage and tax payments. Necessary renovations, upgrades and other expenses can pile up and eat into your profit margin. Being well-informed on property values will be a key fundamental to your success. Determining market value is an art and a science, so you’ll need to do your homework or find a highly experienced realtor that will help you analyze the market.

    5.   Secure Financing

Whether you use cash, a home equity line of credit, resources from other investors or mortgage products, secure the money for your purchase in advance. Banks only want to work with serious buyers who are ready to buy quickly. You could miss an opportunity if you don't have your financing in place.

    6.   Check the Property for Liens

Alien is a legal claim on a property by a lender or other entity that is owed money by the owner of the property. In addition to the outstanding mortgage balance, buyers need to be aware of other liens, which can drive up the purchase price. Examples include outstanding property taxes and unpaid repairs or remodeling done by a contractor.

    7.   Make an Offer

Usually the offer amount is somewhere below the market value but above the total outstanding liens and estimated repair costs. Seasoned investors suggest the offer price should be “at or above list price” to be competitive in today’s market.

Be quick-on-your-feet – speed is of the essence. When a new REO listing hits the market you’ll need to be ready to perform your due diligence, make a decision, and get your offer submitted immediately. How immediate is immediately? 24-48 hours is the optimum window.

Be prepared, you may have to make several offers before you are successful putting a deal together. Remember, this is a business, don’t get emotionally attached to any one particular property, you will lose some deals to the competition; thick-skin is a prerequisite in this business.

In the end, while foreclosure properties can be a great investment, it’s not for everyone. Beware of the possible pitfalls and high risks that come with the territory. Investors need to find their comfort level and build their business plan and expectations accordingly. The old adage applies: “the higher the risk, the greater the reward”. If you spend the time getting acquainted with how the system works, work your plan relentlessly and never give up, you could tap into some of the millions of dollars of profits circulating throughout one of the oldest and most tangible long-term investment mediums.

For a FREE list of foreclosures in Miami-Dade or Broward County;

Email “FREE FORECLOSURE LIST” to: compassroads@compassroads.com. Include a list of Zip Codes or City Names of interest.

Visit our Website: http://compassroadsrealty.com/

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