The number of houses going to foreclosure each week in Wayne County is staggering. About 90 % of them are in Detroit and may not be the best bargains. Many however are in the suburbs and could present good buying opportunities.
Foreclosure is a long, drawn-out process that usually begins as soon as the homeowner stops making monthly mortgage payments on time and ends when the homeowner negotiates a solution with the lender, sells the home and pays off the mortgage, or has the home sold at auction and eventually leaves voluntarily or is evicted. As an investor, you can jump in at any stage of the foreclosure process:
• Preforeclosure: Purchasing the home directly from the homeowners prior to the auction often results in the best deal for both you and the homeowners. Because the foreclosure notice hasn’t been published yet, other investors may not be aware of the situation, reducing the competition. To discover pre-foreclosure opportunities, however, you need to network with people in your neighborhood and let them know that you buy foreclosures, so homeowners who are having trouble making their payments will know how to contact you. It also helps to network with bankruptcy attorneys, divorce attorneys, mortgage brokers, real estate agents, and others who may hear about foreclosures very early in the process.
• Foreclosure auction: The foreclosure auction is the next stage in the foreclosure process in which you can acquire a property. Foreclosure notices are typically posted in newspapers and county news publications, complete with the date, time, and location of the sale along with details about the property, its owners, and the attorney representing the bank. To successfully bid at a foreclosure auction, you really need to do your homework and know what you are bidding on and how much it’s worth. Otherwise, you can get stuck paying tens of thousands of dollars for a worthless piece of paper. Don’t let this scare you off. You can find great deals at foreclosure auctions as long as you know what you are bidding on and you set your bid limit before the bidding commences.• Post auction: Just because the auction is over does not mean that you lost the property for good. If an investor purchased the property at auction, you may be able to purchase it from the investor. If nobody bid on the property, the bank takes possession (after any redemption period), transfers the property to its REO (Real Estate Owned) department, and then hires a real estate agent to list the property for sale. By establishing a relationship with the REO manager, you may be able to get an early lead on the property. In areas that have a redemption period, you may also be able to work with the homeowner to buy back the property from the investor who purchased it at the auction and give the homeowner a little extra cash for helping you do this. (During a redemption period, the homeowner has the right to buy back the property from the investor.)