Property News & Market Trends

Property Investment Made Simple - Part 3

Sorry for the long delay. But I hope the wait is worth it. This week, we cover a great opportunity we may see this year - Foreclosures.

Foreclosures are properties repossessed by banks. Normally, they are sold at a slight discount after an auction. However, for unwanted properties, they may not even find buyers, especially in a stagnant market. So, if you are looking for such properties, turn to your bankers.

Seek out foreclosures
It's like a raw & unexplored mine. If you're meticulous, you can find gold. How can you find them. Ask any banker and they will tell you it's not possible. Banks are suppose to be confidential and are not permitted to reveal their clientele's precarious financial situation. So, if the banks don't tell, how else can you find them? By the time, they reach the auction house, your nMd chances are literally nil.

So, let's start with the sources - the bankers. Build your network with bankers. There are bankers who are helpful to their defaulting clients. They wanted to help. But they are beyond what he can do within the banks. He is binded by tons of rules & regulations and heirachy after heirachy.

Find a banker who is kind enough to help. Never ask him to pass you the contacts. That's taboo and against his conscience. Just let him know that you are in a position to help a person in desperate need of assistance. If he feels that his clients are looking for relief and alternatives, let them call you. He is doing them a great favor.

When you meet up with the sellers, make it a firm statement that this deal, if going through, does not involve the banker and the sellers can't hold the banker liable. You are an independant buyer. Make sure you clear the satnd of the banker early or it may jeopardise your future dealings with the banker. This is crucial.

The only way to get a good deal is to try to foreclose the owners before they go for foreclosures. In the world of foreclosures, there are many vultures and most of the time, auction is used. By the time the properties are in the hands of an auctioneer, the fate of the seller lies in the slam of the hammer. He is most likely getting a poorer offer than what you can offer. More on that later.

Meanwhile, check out the Notice of Default. Normally the owner would be sent a letter of demand, and has several weeks to set the mortgage right or proceedings will be taken. Time is of essence. Move fast, approach right. Note that the owner is under tremendous stress and confusion.

Cash is essential. Not a lot, normally about 3-6 months of arrears. Never approach as a nMd buyer. Approach as a white knight. Gain his trust. Open up alternative solutions for the owner; lease it back, buy an option. Whatever that sets you into a deal. Note that, buying it with nMd does not mean you are paying less. It means you are looking at a creative way of compensating the owner. That means, the owner has to win, before you win. It's not a situation you want to take advantage on unless you have lots of cash.

Just a note of caution, make sure you take over the deed where possible or the bank still has the rights to repossess it. However, before you rush into things, be ready with databases and indepth information. Do your research first. Find out as much as you can before deciding.

Most of foreclosures are 'as it is' condition. So, there's no rectification after the purchase. Be patient. Know your  limitation of resources. Don't overstretch. Determine the fair market value, its upside potential, its current condition state, how much it'll cost to repair, fix or upgrade to a sellable condition.

Target 25%-30% margin, if possible. Supplies are always there in whatever economy. In a year like this, there will be more opportunities. Pick diligently or be picked out of the next better opportunity.

Bingo! U got a Match!

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