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The Real Estate Adviser

Lead the pack when hunting foreclosures

Dear Steve:
Where is the best place to locate bank foreclosures or repossessions and fixer-uppers? What can I do to put myself one step ahead of the next person? It seems I'm always just a little bit late.
-- Day-Late Mary

Dear Day-Late:
First, you need to understand these opportunities come in many forms and that there's no one central data bank for them.

Those fixer-upper pros that are beating you to the punch simply have more experience in the game. While you can't manufacture that, you can create your own comprehensive search process and start establishing some relationships that can help land you on a more level footing.

As you probably know, foreclosures and sale locations are published in the local newspaper under "Legal Notices" and on some Web sites, and the same postings are also placed on the properties themselves. But awareness of this opportunity has grown and competition for the best below-market foreclosure deals is pretty darn stiff, as you've noted, especially in this hot real estate climate.

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There are other options, however. Auction properties, which are usually available because the owner couldn't settle unpaid bills or sell the place before the announced auction date, are another avenue. High bidders win here. Subscriptions to online databases or lists featuring auction locales are available. Check the papers, but also do a thorough Web search for auction properties in your geographic areas of interest. A busy foreclosure attorney, who controls auction properties for one or several lenders, will often have a list of these. (Look in the yellow pages for bankruptcy attorneys and real estate attorneys and start calling.) Also, call larger banks and ask for the names of attorneys they use.

Or you might try the REO property route. An REO home has gone back to the lender, usually because it was not sold at auction. A bank's special-asset manager is usually not a real estate specialist and just wants to get these things off the books, so your chance for a bargain here may be better. However, such managers can be tough to reach, and when you do reach them, they'll probably direct you to a real estate agent who specializes in disposing of REOs for them or possibly an outsourcing firm they are using for REO-inventory clearance. Contact that real estate agent or firm and ask to be put on its mailing or e-mail list for all new REO properties. You might also contact the last real estate agent that you used (assuming it was recently) and ask for the REO contact in her organization.

Then there are pre-foreclosures, which involve highly motivated sellers attempting to exit their homes before the worst happens. Pre-foreclosures are pretty tough to find. You almost have to know someone in financial trouble or have other inside information to get these. Some high-volume foreclosure attorneys may have a few of these on the hook.

Not to be overlooked is the government pipeline, including HUD, Fannie Mae and VA properties. These homes are usually listed on their respective Web sites (check for updates frequently), and/or in the paper, on the local Multiple Listing Service, or with property-management companies. By government mandate, you are required to use a real estate agent to buy these, unlike the others. Both HUD and VA use a similar bidding process. But on a Fannie Mae property, you can make an offer and the organization can accept it, reject it or make a counter offer. At least you have some bargaining latitude here.

In any case, be ready to do some rehabbing. Unless you're handy, the repairs can eat away at your profits by the time the place is ready for resale or renting. Note that the opportunities may increase the farther out you are willing to venture from your metro area, Mary.

Think PAD -- for persistence, aggression, diligence -- and pretty soon you'll be padding your bank account. Good luck.

-- Posted: May 8, 2004

 
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See Also
How to ride the next real estate wave
Flipping foreclosures not for the faint of heart
Buying from an unknown property owner
Track prime rate/other leading rate indexes
More real estate stories

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