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