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10 Tips For Investing In Distressed Or Foreclosed Properties
By Elaine VonCannon, Sat Dec 10th
10 Tips for Investing in Distressed or Foreclosed Properties 1. Search on the world wide web for distressed or foreclosedproperties as a starting point. Use a professional REALTOR toidentify great foreclosure deals for you. You may be successfulat searching the web on your own, but keep in mind some of theinformation is outdated, some may be incorrect, and some of theavailable properties are not even listed. A REALTOR subscribesto updated MLS listings and can offer you the most currentinformation available. 2. If you search yourself for distressed properties and purchasefrom the selling agent, you are paying a commission to someonewith a vested interest. Obtain objectivity in the sale byworking with your own REALTOR. You won’t pay any more.Technically, everyone works for the seller, since they pay thecommission.
3. With distressed or foreclosed properties, time is of theessence. Purchasers must close on the date specified by theagency, and cannot close after this without penalties of $25-200per day. 4. It takes 1-3 weeks to qualify a loan. If you are approved fora loan, make sure you are qualified by your lender as soon aspossible. If you are paying by cash, make certain funds areavailable. If finances are in order, the REALTOR will thensubmit an offer. When the offer is accepted by both seller andbuyer, the REALTOR will submit the ratified contract to thelender and closing agent. These steps will begin the process ofa successful real estate transaction. 5. When purchasing a distressed property, always obtain 3-4 bidsfrom different contractors to estimate costs of repairs, if youdo not plan on doing the work yourself. 6.
If you are going to sell the property after rehabilitatingit, ask your REALTOR to research similar properties in theneighborhood to ascertain market price. 7. Keep copious records for tax deductions. Any expenses relatedto the purchase, repair, or maintenance of the property mayqualify. Meticulous records are key to a profitable real estateventure. 8. The title you receive after purchasing a distressed orforeclosed property is a special warranty deed rather than ageneral warranty deed. Some buyers are alarmed by this, butthere is no need to worry. The purchase of title insuranceprotects the buyer. Each lender purchases insurance to protectthe loan as well. Titling insurance should be obtained by theproperty purchaser. It is always offered by the closing agent.Consider using an attorney instead of a titling company as yourclosing agent. An attorney is only $50-75 more than a titlingcompany. A real estate attorney can remedy any situation thatmay arise. Therefore, they are more efficient representatives ontime sensitive foreclosure properties. 9. Foreclosure propertiesrequire special addendums and special contracts by theindividual bank and HUD office (where applicable). 10. Foreclosure properties are potentially the most profitable,but require the most attention to detail. A REALTOR experiencedin foreclosure deals is highly desirable because the paperworkmust be in order to submit a proper bid, and timeliness iscritical. About the author:Elaine VonCannon is a REALTOR with RE/Max Capital inWilliamsburg, Virginia, and she manages investment property aspart of her business. Her husband Joe is a contractor whocollaborates with her on rehabilitation of properties. She hashelped numerous clients invest in and make money on propertyinvestments in Southeastern Virginia.
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