Buy that sinking house before it totally submerges into the foreclosure process! That’s our advice to home buyers looking for homes in Canton and Plymouth, Michigan.
Home buyers usually ask us to search specifically for foreclosed houses thinking this is where the best bargains are.
Savvy buyers look for houses that are in danger of foreclosure but have not gone into that process yet
Understanding the stages of the foreclosure process can help you gauge when to buy. Once foreclosed, the price you may get on a house may not be the best. The reasons are varied but usually have to do with rules and regulations concerning each stage of the foreclosure process.
You can find great deals on homes at any stage in the foreclosure process – preforeclosure, the foreclosure auction, or post-auction (from banks and investors) – but it’s often a case of the early bird getting the juiciest worm. By purchasing the property directly from the homeowner in preforeclosure, you reap several benefits, including the following:
• A lower price, because you’re not competing against other investors in open bidding.
• An opportunity to inspect the home, because you can make your offer conditional upon the home passing inspection. (When you buy at auction, the homeowners may not let you inside prior to the auction to inspect the home.)
• Assurance that you are buying the home and not just a mortgage. When you bid at a foreclosure auction, you are buying a mortgage, not a home. If you bid on a second mortgage by mistake and do not also buy the first mortgage, you could lose your stake in the home and any money you paid for that mortgage. Buying directly from the homeowner assures you that you are buying the home.
• Security that you won’t lose the home in redemption. In Michigan homeowners have the right to redeem their home (buy it back) after the sale. You could lose it to the homeowners or to another investor (working with the homeowners) even if you win the auction. If the homeowners sell to you, they have no right to redeem.
You can find homes in preforeclosure by reading the foreclosure notices every week they are published. By law, foreclosure notices must be published for a number of consecutive weeks prior to the sale in a local newspaper or county legal news publication. Check with your county’s register of deeds to find out in which publication(s) the foreclosure notices appear, and then subscribe to at least one of those publications.
To reduce the competition even more, you may want to consider learning about preforeclosures even earlier in the process – before the foreclosure notice or notice of default is published and becomes public knowledge. To obtain early notice, try the following techniques:
• Network with attorneys who work with distressed homeowners in bankruptcy, foreclosure, divorce, and probate. These attorneys often have to help their clients liquidate assets.
• Network with other real estate and mortgage professionals.
• Tell everyone you know that you are an investor who purchases homes for cash. Better yet, create your own business card and give it to everyone you meet. People will know they can turn to you if they ever need to sell in a hurry.
• Treat distressed homeowners with compassion and a sense of fairness and do a good job rehabbing the home. By treating people right and doing good work, you earn a reputation that speaks well of you. People who need to sell their home in a hurry will come to you rather than another investor who has a less stellar reputation.
• Advertise that you buy houses for cash. You can post an ad in the local newspaper and hang fliers and signs around town (assuming this is acceptable in the area where you want to buy homes). Before you advertise, however, make sure you have the financing and resources in place to handle several properties at once.
Remember to choose your investments wisely. You won’t get every house you see, nor should you want every house you see. You can afford to be picky and patient – wait for the right opportunity to come your way. And do your homework to make sure it is the right opportunity for you.
For more information ask Ralph R. Roberts, GRI, CRS. An experienced real estate investor and consultant and the author of Foreclosure Investing For Dummies (John Wiley & Sons).
Because of our marketing and longevity in the Detroit western suburbs many homeowners contact us us for advice when they reach the early stages of foreclosure. Our goal is to help people faced with foreclosure by strategizing how to get their home sold with as little damage to their finances as possible. This usually requires a short sale or some other avenue that involves bank refinance or work out. We maintain a database of these houses and with seller permission we have sold several homes before they even reached the market. If you are interested in obtaining a list of these homes call us at 734-459-2600 and ask for the "PreForeclosed Hot List".