BEGINNERS GUIDE TO FINDING BARGAIN PRICED FORECLOSURE PROPERTIES LEX LEVINRAD
As a real estate investor you can create your own advertising campaign to market to and to find these
homeowners in foreclosure. If you market to these homeowners, you can buy their houses directly from them
without competing with other investors.
You see, prior to a property going to the foreclosure auction and selling at the courthouse, it is still possible to
submit a short sale offer to the bank. And right now, with the abundance of foreclosures on the market, the
banks are taking short sale offers much more seriously than they did in previous years.
The reason for this is really quite
simple. When a bank has a bad loan
on their books where the homeowner
is no longer making their payment,
then the bank has to pay a mortgage
insurance premium. This premium can
be as much as 15% of the value of the
outstanding loan. The amount that the
bank can loan out in new loans is also
reduced each time a mortgage goes
into default. For this reason banks
don’t like defaulted loans and will
often sell them at a discount to get rid
of them.
Also, there are many other costs associated with taking a property back via the foreclosure process.
Legal fees to foreclose on a property can be substantial, especially if the homeowner hires a foreclosure
defense attorney. It can take a bank six months or more to finally get the deed to a property, which
means that while they are waiting to take possession of a property, they are losing at least six months of
interest payments. In some cases it can take as long as two or three years for a bank to get their property
back if the foreclosure lawsuit was not filed or served correctly, or if the homeowners file bankruptcy.
There are also many other costs for the bank including cleaning up the property, code enforcement
violations, holding costs, utility costs and paying servicing companies. All of these costs add up to a huge
expense for the bank, which is why the bank is often willing to pay homeowners money to successfully
complete a short sale, instead of going through the entire foreclosure auction process. In some cases I
have seen banks pay as much as $20,000 to homeowners in foreclosure that successfully complete a
short sale.