Buying Short Sales, Pre-foreclosures and REO's
If you’re in the market for a home or investment property, you couldn’t have picked a better time to purchase. The real estate market like many other markets goes through cycles. Prices climbed steadily for about nine straight years before peaking in 2006 and now that we’re on the down swing of the cycle, it’s a much better time to buy a home or investment property than it is to sell one.
Most people think you make your money when you sell real estate but the 
truth is you make your money when you purchase real estate especially if you purchase it wisely. If you bought in an up market and sell in an up market, your profit is most likely limited. The same can be said about buying in a down market and selling in a down market. To maximize your profit if you’re an investor or home owner looking to make at least enough on a sale to put down on the next home, the key of course is to is to buy low and sell high. This sounds like common sense right, that’s because it is. The only problem is buying real estate is often made with an emotional decision and not one that’s based on numbers or what the market indicators are telling us. If we see a house we love and we want, we most likely will pay what the seller is asking for or at least close to it.
The real estate market doesn’t cycle between a seller’s market and a buyers market very frequently. The seller’s market window of opportunity usually last longer than the buyer’s market window of opportunity as we’ve seen in our last few cycles. During the last seller’s market and upswing in property values, most buyers didn’t mind buying high because all indications were that prices and property values would continue to climb. Things were so good for so long that lenders started to come up with inventive ways for people with questionable credit and little or no money to put down to be able to buy homes. After the cycle peaked in 2006 and then plunged in 2007 it caught many new home owners and lenders by surprise.
Many people who had purchased a home during the peak of the market and started out with little or no equity, quickly found themselves owing more on their home than their home was now worth. Many other people who had adjustable rate mortgages also found themselves in trouble when their rate adjusted higher beyond their affordability. Without the cash available to refinance or equity to use toward the cost of refinancing, many people found themselves stuck with a mortgage they couldn’t afford anymore.
The combination of the market turning quickly and the over extending of credit has led to a record amount of homes heading toward foreclosure and homes that have already been foreclosed on. Most homes that are heading toward foreclosure can be purchased through a pre-foreclosure sale in what’s commonly called a short sale. The process can be difficult and the time involved can be very lengthy but the outcome can be worth the wait in most cases. Many of these homes can be purchased below market value and can be a winning situation for not only the buyer but owner who can get out from under their mortgage and the lien holder who now will not have to foreclose. The key on buying these homes is getting the sale approved by the mortgage lien holder who is being asked to accept less than what’s owed on the mortgage, before the property ends up at a Trustee Sale or Sheriffs Auction.
Homes that can’t be sold as a resale or Short Sale before being foreclosed on will end up at a Trustee Sale or a Sheriffs Auction and most likely will have a price tag that includes what’s currently owed on the mortgage lien or liens and the cost of the auction combined. Homes that don’t sell at these sales or auctions wind up having their title revert back to the senior lien holder who now will have legal title and most likely all other junior liens will be wiped out in the process. These properties can now be sold as Real Estate Owned properties or REO’s as their more commonly known as.
REO’s are usually priced at current market value for the area in which their found and usually have their condition taken into consideration. Most will a clean title free of any mortgage liens, tax liens and/or mechanic liens. They also will have to be purchased As Is and the purchaser will be responsible for all their own fact checking as the Property Disclosure is almost always empty due to the fact the new title holder would have never occupied the property. Buyers of these properties will also most likely need to pay for the de-winterization and re-winterization of the property for any inspections they would like to conduct. The buyer may also be responsible for paying all the transfer tax in the transaction instead of the customary 50-50 split depending on whether Fannie Mea was involved.
Homes being sold in short sales by motivated sellers who need to sell and sell fast, and homes that have already been foreclosed on and are now being sold as REO’s, present a gre
at buying opportunity for investors and buyers. Combined with historically low interest rates this buyers market is one of the best in recent history for purchasing a home. The trick to finding and buying these homes is knowing where to look and how to navigate the different purchasing procedures that go along with these types of sales.
That’s where I can help as a short sale and REO purchasing specialist.I currently list and sell short sales and REO’s and I know the ins and outs of these types of sales. I’ve visited over 400 of these homes in 2008 doing BPO’s (Broker Price Opinions) for Banks and other institutional lenders. This gives has given great inside information on what homes might be coming on the market as short sales and REO’s before their listed. Call me today and find out how my 10 Point Buyers Program can help you find and purchase a Short Sale, Pre-Foreclosure or REO today!
Sincerely,
Paul Martin 