FAQs - Visitor Questions

In your [web site] example on "How to Read a Foreclosure Ad," the 90% balance is due within 30 days of sale. In your Real Deal Example, you clearly had more time than that (90 days altogether). Was that 90 days part of the original foreclosure terms, or did you negotiate the additional time? And what happens if you don't pay up by the settlement deadline? Do you lose the property and your 10% down?

The 90-day total was a self-imposed schedule for concluding the entire deal. This meant that I had to buy the property, settle with the foreclosure attorney, do the fixup, market the property, sell it to the buyer, and settle with the buyer all within 90 days. In this example, and in all my other deals, I have never failed to conclude a deal within 90 days. The strategies for completing all of these steps are explained in the book.

Depending on your jurisdiction, you have up to days after the auction to pay the remaining balance. In my example included on the web site, I had 20 days. Generally, if you miss the deadline for paying the remaining balance, you lose your deposit and the chance to pursue a great deal. You should therefore make sure that you are financial prepared to close the deal before you make your bid.

How are opening bids determined? It seems, after researching and tracking a number of properties, that the opening bids for houses in foreclosure sales are high. Does this mean that the lender’s opening bid includes the missed payments and the costs of foreclosure?

Yes. Opening bids generally include the mortgage balance, arrears (missed payments), and foreclosure costs (such as advertising, attorney fees, and title search). That is why an opening bid is often more than just the principal balance. If you find that a number of sales are at prices close to the previous sale price, it could mean that the owners have low down payment loans. It could also mean that the loans are relatively new (say 1 or 2 years) which imply that the properties don't have much equity. You should focus your attention on the properties with high values relative to their debts. Look for those that you could buy at 30% below market. I wish you good fortune in your investments.

I am trying to find a property to buy, but haven't got the credit to enable me to find or get a mortgage. I can afford to pay my mortgage as I find renting a loss. Is there any advice you can give me?

One way to get started in your situation is to find lenders that would be willing to do no or low documentation loans. Keep in mind that these types of loans are harder to come by due to the current sub-prime mortgage crisis.

If you're serious about doing deals, check the local papers or phonebook for lenders who offer low doc loans. These loans are more expensive than loans to folks with great credit ratings, but they could help you get into a house. On the other hand you might want to start improving your rating so that you can get the better loans. Or you can find an investment partner, one who would qualify for the financing. You could agree to 50/50 ownership or some other mutually agreeable ratio.

I'm starting to grow a interest in real estate investing and I want to focus on foreclosures. My question is, have you known people to make thousands are even millions on just one property alone during the foreclosure process? For example, if you pay $20,000 for a foreclosure property and the property is appraised at $200,000 have you known people to sell at 200,000?

People can and do make tens of thousands of dollars and a lot more on foreclosure properties. It is possible to make hundreds of thousands of dollars on a single deal, but probably not on a residential deal. I have not heard of anyone making millions on a single residential property. Some commercial foreclosures could probably generate that kind of profit.

Regarding your $20,000 example, I would recommend offering the property for sale at a slight discount, say $180,000 - $190,000. A smart investor would offer a price just below the market for a quick sale. Of course you may have fixup costs (if you choose to rehab the property), carrying costs (unless you pay cash), marketing costs, and finally settlement costs. Let's say all of those costs add up to $30,000, worst case. Your total profit would be $180,000 - $30,000 - $20,000 = $130,000. So it is quite possible to make a lot of money on foreclosures, especially if you can find deals like the one you mentioned.

Just finished reading your book. Good book. Great ideas. I am looking forward to attacking the foreclosure market but I have this one question which is: on your 70% rule, am I to buy the property for 70% of current value or 70% of fixed up value? There is a Sheriffs Sale today and I will be attending to possibly purchase a property.

Glad you liked the book. The 70% rule is based on the market value of the property AFTER it is fixed up; that is, as compared to other non-foreclosure properties in the same neighborhood.

As an example, let's say that the average value of a 3 BR, 2.5 BA house in a given neighborhood is worth $150,000. If you found a foreclosure in that neighborhood (with the same BR & BA) you would not want to pay more than 70% of 150K or $105K. Your offer of $105K or less would reflect the "current" value of the property just before an auction or Sheriff's sale. If the property was not facing foreclosure, its market value would be $150K.

I'd like to bid on a house that is going to go to sheriff's auction. I have a lot of questions but cannot find any answers. The property was in foreclosure and then went into bankruptcy. About 3 months ago, the property came out of bankruptcy and the lender said it was definitely going to auction. The lender also said it hadn't decided if it was going to bid on the house. Now I can't get any more information. Can you tell me how to find out more? Can you tell me the process, step by step, that a foreclosure takes? Is it possible at this point to buy it from the bank before it goes to auction?

There isn't much space to get into a step-by-step discussion here. Such a discussion is presented in great detail in the book, available at foreclose.com. However, the best place to start in this particular situation is to find out who the foreclosing attorney is and call his/her office. They generally provide helpful information to interested buyers.

Unfortunately, you cannot buy the property from the bank before the auction because the bank hasn't gotten it back yet. At the auction, the winning bidder would be an investor like yourself or the lender, whoever bids the highest price. If no one bids, the lender gets the property by default.

One of the reasons a lender would bid is to make sure that other bidders offer a high enough price to cover the loan balance and foreclosure costs. On the other hand, the lender could decide to let it go at the auction and be done with it, even though this may mean losing some money. If the bank does get it back, you could then begin your negotiations to buy the property from the bank. I have done this before so I know it works, especially with lenders that are eager to make a deal and get rid of the property.

My husband and I along with two other couples are starting a business. We would like to go into the homes that have been foreclosed that need to be cleaned, trash removed, yard work, etc. to enable the property to get ready for resale as soon as possible. Would you have any information on this matter?

I applaud your efforts. It sounds like your group is ready to make money. Having a group that can pool resources (including time and money) is an excellent way to get started. To be a successful partnership, your group must learn the specific foreclosure investment techniques. This includes how to find properties, how to analyze deals, how to get the repairs done, how to market the properties for resale or rental, and a number of other ideas. You should also learn about how to make money with pre-foreclosures, auction properties, and bank repossessions.

My web site presents a wealth of products to help you become successful with foreclosure investing. The process is described in detail in the Books, Fact Sheets, and Special Reports. Of course, there are other books, courses, and seminars that you can consider to learn foreclosure investing techniques.

Back to FAQs