 Good
time for foreclosures ... if you're brave
|
 Dear
Real Estate Adviser,
I am thinking of buying a foreclosure home to live in and possibly
another for an investment some time in the next year or so. I am
wondering: Is this a good time to look?
-- Danny
 Dear
Danny,
It might be the best time in years, which would mean it's perhaps
the worst time for thousands of financially strapped U.S. homeowners
struggling to hang onto their homes.
Many economic experts are predicting that mortgage
delinquencies will rise up to 15 percent in 2006 among homeowners
with higher-cost or "subprime" loans. About 19 percent
of all U.S. home loans are now subprime in contrast to just 5 percent
10 years ago, according to the folks at Fitch Ratings, an investment-analysis
firm. A lot of those homeowners with adjustable-rate subprime loans
will see their loans reset at higher interest rates in the coming
months and that will spell trouble.
Other factors expected to contribute to the default phenomenon
are already-high consumer debt levels, rising energy costs and the
advent of somewhat risky interest-only mortgages. So expect to see
a lot of defaults on low-to-mid-level homes in 2006, although your
opportunities will vary from market to market, of course.
That said, foreclosure buying is a very competitive
game right now, with so many real estate gurus advocating the strategy
in books and seminars, and on TV and the Internet. Just do a Web
search under "foreclosure opportunities" and you'll see
what I mean. Obviously, more and more buyers -- particularly investors
-- are looking for an advantage in the game.
While there's not space here to go through all the
strategies, buying a "pre-foreclosure" from a defaulting
or financially strapped owner might be the best way to go on the
consumer end. The county clerk's office keeps lists of such pre-foreclosures.
Seek out titles where a "lis pendens" notice has been
filed by the lender.
Before contacting and engaging in negotiations with the owners
of these properties, make sure you are pre-qualified for a loan.
You'll probably want to enlist a buyer's agent to make sure your
best interests are represented and that you make the right offer
-- which would ideally be at a below-market price.
Finding an agent with foreclosure experience would also be a plus.
The foreclosure-property auctions that you see advertised are usually
the realm of more heavily bankrolled professional investors who
stand ready to pay cash for a property.
If you are brave and well capitalized, you might try your hand
at it. You might want to attend one or two for observation before
acting. Whichever approach you try, don't give up if your first
few efforts don't pan out. Eventually, your tenacity will pay off
in substantial savings. Good luck and happy hunting.
| 
