REI Wealth Monthly Issue 02 | Page 48

INVESTING IN FORECLOSURES FOR BEGINNERS LEX LEVINRAD Once a “lis pendens” has been filed the property is considered to be in pre-foreclosure. If you subscribe to a public database like www.foreclosures.com, www.realtytrac.com and many other similar sites, you can get access to properties that are in pre-foreclosure. You can also get a list directly from your county clerk by visiting the county courthouse. In some counties these lists are available online. Anyone can become a pre-foreclosure investor simply by Investing in pre-foreclosures requires purchasing a list of homeowners in foreclosure or subscribing to a negotiating and buying a house database for a monthly fee. Since there are so many potential pre- directly from the homeowner. This foreclosure investors, homeowners in foreclosure are literally negotiation is usually done without bombarded with offers to purchase their homes. This makes it the banks knowledge. Since the “lis difficult for investors to differentiate themselves from one another to pendens” filing is public knowledge, the homeowner. Additionally, there is often hostility and anger from investing in pre-foreclosures is very the homeowner, since they do not want to be bothered by competitive “foreclosure sharks”, or people that they perceive as “foreclosure since everyone has access to the same information. vultures” trying to take advantage of their situation. If the house has no equity, you will For the above reasons, pre-foreclosure investing is a difficult and need to negotiate a short sale with competitive area of foreclosure investing. If the homeowner cannot the bank. A short sale is where a negotiate a loan modification or sell their house to another investor, bank agrees to take less than the full then the house goes to the foreclosure auction. amount owed to them. This occurs when a buyer is only willing to Foreclosure Auction purchase the property for less than the amount owed on the mortgage by The foreclosure auction is a public auction that allows any member of the seller. In the case of a short sale, the public to bid on a house. Typically, you need to register prior to the the bank is aware of the process day of the auction and you need to have a cashiers’ check made since you will need to negotiate with payable to the clerk of the court for at least 5% of the purchase price. them. The department at the bank This amount varies by State and County. that is responsible for negotiating short sales is called “loss mitigation”. If you bid on a house and you win the auction you are expected to pay