PropertyForeclosure.com Blog

The current real estate industry has some big problems. Subprime lenders are going bankrupt because they made risky loans to people who could not afford them. Huge numbers of those loans are either in foreclosure or are heading in that direction. Across the United States, foreclosure rates increase monthly, and it’s anyone’s guess where it will all end.

Many real estate investors in the Washington, D.C. metropolitan area are now asking themselves: How will the rising tide of foreclosures affect the local Washington real estate market?

It’s no secret that foreclosures are on the rise in the Washington metropolitan area. According to RealtyTrac’s latest figures, there are 3361 more foreclosures in the Virginia-Maryland-D.C. region than there were just one year ago. Recent figures obtained from the Metropolitan Regional Information System (MRIS) indicate that in the counties closest to Washington, D.C., home sales are off by more than 14% over one year ago.

Will area foreclosures keep pace with those in the rest of the country? Or, will the presence of the federal government provide a built-in immunity?

As a local Washington, D.C. area investor, I have seen the region weather some tough times. The last big market correction started in 1989 and lasted several years. Over one thousand savings and loan institutions across the nation went bankrupt from mismanagement and greed. As a result, the federal government, who insured them, ended up with thousands of properties on its hands.

The situation was so bad that the government stepped in and created the Resolution Trust Corporation to sell the houses it had accumulated from the S&L disaster. Thousands of houses were dumped into an already stagnant real estate market.  During much of the 1990′s, the Washington region, like many areas of the country, saw very little appreciation in home values. Are we in a similar situation today? Although the circumstances may seem familiar, only time will tell what the long-term effects will be.
What Is The Government Doing?

According, in part, to an August 31 Administration press release, President George W. Bush announced that HUD’s Federal Housing Administration (FHA) will enhance its refinancing program to help an estimated 240,000 families avoid foreclosure.  

“FHASecure,” a plan at the federal level, was created for people who have good credit but who have not made timely mortgage payments because of re-setting adjustable rate mortgages.  It will give them an opportunity to refinance their existing mortgages so that they can keep their homes. Using traditional underwriting standards, FHA will charge mortgage insurance premiums based on the individual risk of each loan, so that it can expand access and help more families. The government’s hope is that FHASecure will prevent the problems that now plague the real estate industry from ever happening again.

The government’s FHASecure program will definitely help the overall real estate market in the U.S., and, to some extent, the Washington, D.C. area.  The market has a long way to go, however, before it returns to anything approaching “normal.”

It’s no secret that foreclosures are on the rise in the Washington metropolitan area. According to RealtyTrac’s latest figures, there are 3361 more foreclosures in the Virginia-Maryland-D.C. region than there were just one year ago. Recent figures obtained from the Metropolitan Regional Information System (MRIS) indicate that in the counties closest to Washington, D.C., home sales are off by more than 14% over one year ago.

Will area foreclosures keep pace with those in the rest of the country? Or, will the presence of the federal government provide a built-in immunity?

As a local Washington, D.C. area investor, I have seen the region weather some tough times. The last big market correction started in 1989 and lasted several years. Over one thousand savings and loan institutions across the nation went bankrupt from mismanagement and greed. As a result, the federal government, who insured them, ended up with thousands of properties on its hands.

The situation was so bad that the government stepped in and created the Resolution Trust Corporation to sell the houses it had accumulated from the S&L disaster. Thousands of houses were dumped into an already stagnant real estate market.  During much of the 1990′s, the Washington region, like many areas of the country, saw very little appreciation in home values. Are we in a similar situation today? Although the circumstances may seem familiar, only time will tell what the long-term effects will be.

What Is The Government Doing?

According, in part, to an August 31 Administration press release, President George W. Bush announced that HUD’s Federal Housing Administration (FHA) will enhance its refinancing program to help an estimated 240,000 families avoid foreclosure.  

“FHASecure,” a plan at the federal level, was created for people who have good credit but who have not made timely mortgage payments because of re-setting adjustable rate mortgages.  It will give them an opportunity to refinance their existing mortgages so that they can keep their homes. Using traditional underwriting standards, FHA will charge mortgage insurance premiums based on the individual risk of each loan, so that it can expand access and help more families. The government’s hope is that FHASecure will prevent the problems that now plague the real estate industry from ever happening again.

The government’s FHASecure program will definitely help the overall real estate market in the U.S., and, to some extent, the Washington, D.C. area.  The market has a long way to go, however, before it returns to anything approaching “normal.”

FHASecure is not designed for the thousands of real estate speculators who purchased properties hoping to make a quick buck. In reality, FHASecure will only help a relatively small percentage of people – those facing foreclosure due to re-setting of adjustable rate mortgages.

How do I see the Washington, D.C. area real estate market in the near future? In any metropolitan area, a strong economic base is critical to a healthy real estate market.  The number of available jobs is a key factor. Here in the Washington, D.C. area, we have a very strong job market. Not only does the federal government supply thousands of local jobs, it rarely lays off its workers, thus, giving them job stability. To make a strong job market even stronger, there is a huge need for a steady supply of government contractors for the war in Iraq, as well as professionals to assist in the development of Homeland Security. With an exceptionally strong economic base, Washington, D.C. will weather the current market correction better than most metropolitan areas.

How to Get Your Foreclosure Houses Sold in Today’s Market

So, how does an investor adapt to the present trends in real estate? I’ve invested in foreclosures for over twenty years in Washington’s metropolitan area and today I’m still buying and selling houses. In fact, I’m on my third house deal this year, and I’m making good profits with each house.

How am I doing it in such a buyer’s market? First, think about what sells a house. There are two factors you must consider when buying an investment house that you plan to fix up and resell. These two factors are price and condition. In today’s market, in order to attract buyers, you must address both of these factors.

A couple of years ago, when there weren’t so many homes on the market, you could more easily sell a house that was not in top condition. Now that the real estate market has turned and there are so many houses for sale, it’s not enough to have a house in “move in” condition. Your houses must be in “top-notch” condition. They also must be offered at a price below their current fair market value.

In the Washington, D.C. metropolitan area, “top notch” means that you must go the extra mile and anticipate what today’s homebuyers want.  For example, is your investment property in a middle-class neighborhood full of four bedrooms, two and one-half bathroom single family homes? Then, buyers want extra value – like granite countertops and stainless steel appliances in the kitchen, not to mention a ceramic tile kitchen floor. Making stand-out improvements like these to the most important room in the house, the kitchen, is one of the ways I’m getting my houses sold in today’s market, and how you will get yours sold, too.

Of course, the list doesn’t stop at the kitchen. Don’t overlook those bathrooms! Neglecting bathrooms – the second most important rooms in the house – is a big mistake.  You don’t need to spend as much to get the bathrooms in top condition, but don’t forget them or your property will sit on the market unsold.

Some key low-cost improvements can also make a big impact.  Replacing worn carpet,

applying a fresh coat of paint, and replacing light fixtures inside and outside can make a house look great. When you think about it, how could it be anything but irresistible to potential buyers when they walk into a house where everything has been updated?

A great-looking house still won’t sell quickly these days, however, if the price isn’t right. This past year, I’ve watched other investors set high prices and turn down offers – and not sell houses. By setting my asking price carefully and accepting reasonable offers, I’ve been able to sell properties, make profits and be ready when the next opportunity presents itself.

This is what it takes to sell a property in today’s Washington, D.C. market. I don’t invest in other areas of the country, but I am 100% sure that offering a house at an exceptionally good price
and in top notch condition are the two things that will get your houses sold when all the others are sitting on the market indefinitely.

You may have already heard that buying pre foreclosures is a great way to break into real estate investing.  But you may not realize that you can invest in pre foreclosure properties even if you’re broke, have bad credit, and know very little about real estate.

Though it’s hard to believe, it’s the truth.  You can begin making great profits buying pre foreclosure properties with as little as 10 dollars for the contract.  Although nothing worth getting is completely free – well, not even pre foreclosure properties – 10 dollars for a great piece of property is the next best thing.

If you have bad credit or no credit, pre foreclosure investing is one area of real estate investing where that truly doesn’t matter.  You can buy a pre foreclosure property without a credit check or credit scrutiny.

Surely, then, you think, you’d have to be a real estate expert to be able to pull off a good (and free, no-credit check) pre foreclosure investment deal.  Not true.  In fact, being a real estate agent or expert may get in your way when you’re buying pre foreclosure properties.

So what’s the catch, you say.  The catch is that there is another type of investment you have to make in a pre foreclosure deal.  It’s an investment of certain personal attributes.

You can do a pre foreclosure deal without money, without good credit, and with no knowledge of real estate.  But what you must have to be a successful pre foreclosure investment tycoon are these:

Ÿ         Tenacity

Ÿ         Resilience

Ÿ         A deep desire for success

Ÿ         A goal to improve your financial situation (in other words, the burning desire to make lots of money!)

Those personal attributes are far more important for successful pre foreclosure investing, than money, credit or knowledge.  Of course, you do need to read and learn about how to safely and effectively make a pre foreclosure killing.  And there is that 10 dollars for the contract.  But if you sincerely want to succeed at pre foreclosure investing, the right personal traits are your real tools for success.

Don’t let these misconceptions about real estate investing keep you from the satisfaction of making money with real estate.

Real estate is so risky. The truth is that real estate is one of the safest investments you can make.  Though making money with real estate involves some risk, the more you educate yourself, the less risky it is.  In reality, investing in the stock market is not a sure bet, but making money with real estate, done right, almost certainly is.

The economy is bad. The truth is that any economy can be conducive to making money with real estate.  If house prices are going down, buy at an even lower price, and sell just below market.  Offer an incentive to buy.  If you’re investing in a rental property, offer free upgrades.  If spending a little every month means you’ll succeed at making money with real estate, it’s worth the effort.

There’s too much competition.  The truth is that while there are a lot of people who would like to be making money in real estate, few actually act on it.  At any given time, there are hundreds of properties for sale, many with eager sellers. If making money with real estate is your goal, there are plenty of opportunities, ripe for the picking.

I don’t have money to get started.  The truth is that you don’t have to have large amounts of money (or any money) to start making money with real estate. In many cases, you can get started with as little as $10.00 to cover the price of the contract.

It takes too much time.  The truth is that making money with real estate only requires the time you might take to do a hobby – or to watch television.  Yes, you may have to cut back on some TV time, but when you start making money with real estate, you won’t even feel “deprived.”

Here’s the truth about making money with real estate:  There are plenty of properties out there that can be had with a minimum cash outlay, and sold for a nice profit.   It doesn’t require any more time than a typical leisure activity, and it can be done in any economy.  So, what’s keeping you from making money with real estate?

Probate is an often-misunderstood term.  A probate house is one where the owner is deceased, and the property is part of an inheritance.  We often hear references to being “tied up in probate.”  

References to probate can put an investor off.  But the truth is that when it comes to probate houses, the word probate can mean easier profits for a real estate investor than you may think.  Here’s why:

First is the very fact that many investors tend to avoid probate properties because of the idea that they’re “tied up” and will be a problem to try to deal with.   This just means more opportunity for you.  Investing in a probate property requires knowing the same information about the property as for other types of real estate investing: What’s the value of the probate property?  Are there any title issues to resolve?  Will it require extensive repairs?  Are your financial and legal interests protected?

Second, probate properties are often in the hands of very motivated sellers.  This is true for a variety of reasons. The probate property may have been left to several heirs, who would rather sell the home and divide the cash than decide who gets to live in the house.  The property may require extensive repairs that the heirs don’t want to bother with, or can’t afford.  The heirs may be involved in jobs and lives that are far away from the location of the probate house, and may not want to move in order to live in the house. The house may be approaching foreclosure, and capital may not be available to “rescue” the house and catch up the payments.

What could be richer with easy investing potential than a market that most people mistakenly avoid because they don’t understand it, and where the sellers are often very eager to give you a deal?   Investing in probate property can be your ticket to big real estate profits.

When a mortgage loan is in the pre foreclosure stage, the property is ripe for buying; no one is making payments on the property, and both the owner and the lender deeply want to turn the situation around.  Even before a property reaches pre foreclosure, many homeowners are in situations where they’re eager to sell in order to remove a huge financial burden from their shoulders. Here are some situations where you’re likely to find motivated sellers:

Pre foreclosures – As mentioned above, when a homeowner finds his property in pre foreclosure (his loan is in default status, but the property hasn’t reached the foreclosure auction date), he’s likely to be highly motivated to unload it to avoid foreclosure.  He wants out of a tough situation, and you can provide him with the solution

Divorce – When couples split up and a property is involved, they may simply want to get rid of the property quickly and move on.  Very often, newly single people find it difficult or impossible to maintain payments on their home with only one income.  Whether they’re already in pre foreclosure, or are just beginning to fall behind on bills, they may welcome your solution.

Landlords who want out – A property doesn’t have to be in pre foreclosure for its owner to be ready to bail out.  When a landlord is tired of maintaining a property he doesn’t live in, or wants to get rid of the headaches that can be caused by bad tenants, he is likely to be ready to talk to you about selling his property.  If the property has gone un-rented for several months, he may be more than ready to give you a good deal on it just to unload it and avoid pre foreclosure.

Probate Properties – Though far from a pre foreclosure situation, a death in the family can leave surviving family members with an inherited property on their hands that causes them additional burdens.  If several family members have inherited the property, they’re likely to want to sell the home and split the cash, rather than decide who gets to live in the home and buy the others out.  Since any profit from the house is free and clear, they’re likely to be open to an offer for less than market value just to settle things.

If you’re watchful and creative, real estate deals can be yours for the asking!

If you’re looking for great deals in pre foreclosure investing, distressed property can be a good way to make profits.  But before you commit to anything, make sure the “deal” is really a deal.  Here are three things you need to consider before you invest in distressed property:

What repairs will you need to make on the distressed property?  Distressed property comes in all degrees of distress.  Make sure you’re aware of the problems, as well as what it will cost to fix them.  Two ways to find out about the issues a distressed property has are by asking the owner, and by hiring a licensed home inspector.  It’s always “worth it” to hire a home inspector if you’re seriously considering investing in a property; all the more so if it’s a distressed property.

What is the distressed property worth?  The seller will tell you what he thinks his distressed property is worth.  Again, it’s “worth it” to hire a professional appraiser, who will take into consideration comparable values and sales of similar properties nearby, for a realistic evaluation of what the distressed property is currently worth in the market.

What is the best price you can get the distressed property for?  If a distressed property is in the pre foreclosure stage, the owner may be very motivated to sell it for less than what it’s worth.  A good deal for you is when you can get the distressed property for at least 20% less than its market value. 

Now, apply the three questions above: Know what the cost of repairs will be to make the distressed property saleable, and know what you can sell the distressed property for when it’s in good repair.  If you can get the property for at least 20% below its market value, repair it, and still be able to make a profit by selling it at its current market value, then you gotten a great deal on distressed property.

In today’s market, real estate flipping has become a popular and effective way for investors – even less experienced investors – to make money at real estate.  A real estate flip is when you buy property and quickly resell it instead of keeping it as a long-term investment.

Here are three ways to make money with a real estate flip.

Buy-it, fix-it, flip-it:  This is the most common type of real estate flip.  In a nutshell, you buy a fixer-upper property, make improvements and repairs, then sell it on the retail market to a buyer who will live in the house.  With this type of real estate flip, you can easily make $15,000 to $50,000 in profit, depending on factors such as location, ultimate cost of repairs, and price you paid for the property. 

When you pursue this type of real estate flip, be sure that you’re conservative and realistic in your estimates for repair costs, time to resell the property, and actual selling costs. 

Wholesale real estate flip:  Very simply, this type of real estate flip consists of buying a property that needs to be rehabbed, then quickly turning around and reselling it for a few thousand dollars more to another investor who is looking for rehab properties.  Even though your profit may not be as great with this method of real estate flipping, you’re more likely to sell the property quickly, thus realizing your profit quickly.

Buying, then selling “for terms”: When you do a real estate flip this way, you buy the property, fix it up, refinance it at its current appraised value, and sell it on a lease with option to buy.   The rent payment you receive should cover your mortgage payment.  Because you don’t have to pay a broker’s fee, you gain more profit when the tenant exercises his option.  You can even benefit from a lower capital gains tax rate with this method of real estate flip.

If you enjoy the challenge and rewards of making money at real estate, consider one of these methods of real estate flipping to realize substantial profits.

Pre foreclosures, flipping, probate property…You’ve heard it before: Investing in real estate is a solid wealth builder. If only you had thousands of dollars lying around to invest, right? The truth is, you can get involved in real estate investing – with very little cash – by investing in pre foreclosure properties.

You may already know that investing in pre foreclosures (properties where the homeowner has defaulted on the mortgage payments) is one of the best ways to get involved in real estate investing. But if you’re still not quite convinced, here are some more reasons why pre foreclosure properties can be a great way to profit with very little cash up front.

The pre foreclosure period is the period when a mortgage loan is in default, but has not yet reached the auction stage. No one has been making the payments on the pre foreclosure property. The bank wants payments on the property, and the property owner wants payments on the property to occur. What this means to you as a pre foreclosure investor is that you don’t have to worry about holding costs. It also means that the seller of the pre foreclosure property is likely to be open to your offer, since he just wants to get rid of the problem, and you can help him do just that.

When a loan is in default, resulting in a pre foreclosure situation, you, as a pre foreclosure investor, have the opportunity to enjoy large equity spreads. Why? The bank is under pressure to liquidate the bad loan rather than be forced to take the property back. You can request that the lender discount what is owed on the payoff – something you can’t do unless a loan is in default.

When you buy a pre foreclosure property, you can take over the financing already in place. You don’t need to be pre-qualified, or have your finances under a magnifying glass. The best part of this is that, even by taking over the payments on the pre foreclosure property, you’ll still enjoy the tax advantages – without the risk of being personally liable for the mortgage and the property.

So let’s put it all together: A motivated seller, a willing bank, a large equity spread, and little or no liability – what’s stopping you from being a prosperous pre foreclosure investor?

If your resources are limited, if your credit is less than stellar, or if you just enjoy making a profit, one of the best ways to get started investing in real estate is to buy foreclosures. There are three stages in the foreclosure process, providing you with three opportunities to buy foreclosures: default, or pre foreclosure; auction/sale; and REO (Real Estate Owned). Each stage carries its risks and rewards.

Buy Foreclosures at the Pre Foreclosure Stage At the pre foreclosure stage, the homeowner has defaulted on his mortgage loan. The bank has begun the foreclosure process, which will end with the foreclosure auction. In pre foreclosure, the owner still has a chance to preserve his credit by selling the house and thus getting rid of his mortgage debt. He is often anxious to “unload” it, to end his financial troubles. If you want to create a win-win situation for you (you get a property at a deep discount) and for the seller (he sells his property), buy foreclosures while they’re in the pre foreclosure stage.

Buy Foreclosures at Auction A public auction can be more nerve-wracking than working directly with the seller to buy a pre foreclosure property. First, you’ll be competing with the lender, as well as with many others who also want to buy foreclosures. The process moves quickly, and the property is auctioned off to the highest bidder. Though you may need to have a large amount of cash up front, and sometimes the remainder within weeks or months, you can often get great property at 35-40% off market values.

Buy Foreclosures in the REO (Real Estate Owned) Phase When the lender takes back a foreclosure property to cut its losses, the property is called “REO.” An REO property can often be very easy to buy, because lenders generally don’t want to be in the business of owning property, and want to move the property quickly. If you buy foreclosures in the REO phase, you may not get discounts as deep as with auction sales or pre foreclosures, but, on the other hand, your risks are generally lower.

Each stage of the foreclosure process offers a distinct way to buy foreclosures. If you do your homework, you can buy foreclosures at minimal risk and maximum profit.

You may already know what a huge profit potential there is in foreclosure investing. You may also know that investing in foreclosure properties is a great way to get started in real estate investing. But here are three more reasons to invest in foreclosure property:

In today’s economy, many foreclosure properties can be found in upscale neighborhoods.

Many people simply can’t afford to continue making large mortgage payments on their upscale homes, and consequently, they default on their loans, placing their homes into foreclosure. When this happens, many people in this situation can be encouraged to avoid a foreclosure auction and preserve their credit by selling their property quickly to someone who can solve their problem by taking their foreclosure property (and their loan) off their hands. If you’re that “someone,” you may get a fantastic deal on a high-value home you may not otherwise be able to afford.

Buying foreclosure properties can allow you to invest in other properties with the money you save (foreclosure or not). Or, you can use the money to convert the foreclosure property into a rental home, or flip it and make still more profit.

You can buy a foreclosure property quickly (provided the owner is willing, and he usually is) and without undergoing financial scrutiny. Because the foreclosure process is a fast process (usually about three weeks, from beginning to end), and because you’re likely to have a cooperative seller under the circumstances, you don’t have to go through the regular financing channels. You can deal negotiate with the owner to take over his/her loan, offer cash (if you have it), or use other creative financing that doesn’t involve a long, drawn-out financial process.

Foreclosure investing has always been a great investing opportunity. In today’s economy, it may be just a little easier to take advantage of this opportunity.