How can I get THESE PROPERTIES before the BANK?

[Keith Lewis]

I live in South Florida and have a few local neighborhoods that are predominantly retirement aged neighborhoods however sound investment areas. I have done 6 properties and love them. I am helping to increase the comps - but the market is charging up in here anyway.

Here is the problem... The banks always end up with them and lately Fannie is buying them at auction too. We all know what happens then, they overprice JUNK.

HOW CAN I GET THEM BEFORE THE BANK? I am a licensed real estate agent and licensed building contractor and the banks wont talk.

Typically they are probate scenarios but no next of kin exists or the family is just not willing to talk to me. Then, 4-6 weeks later it forecloses. I cant get thru to any of the banks! How can I get my hands on these properties? Help!

[Wayne Brooks]

If the owners won't deal with you, there's nothing you can do. If they will talk to you, and there's equity, then you're good. If they're upside down, and they'll talk, then it's a short sale. Unless the seller cooperates, talking to the bank is useless.

[Keith Lewis]

The owners are usually are dead/have passed recently. The families, believe it or not are non-existent. Is there something I can do with local probate? Its crazy, Fannie is single handedly destroying this neighborhood.

[Wayne Brooks]

No, only an heir/personal representative can do anything on behalf of the estate.

[Patrick L.]

It doesn't matter who you are, the bank doesn't own the property until the auction so there's nothing for them to talk to you about. They'll only talk to the owner and unless the owner wants to list and try a short sale you can't be involved in anything (Fannie has some tougher restrictions on short sales now). Fannie isn't buying them at the auction, they own the mortgage on the properties you're seeing even if a different bank is the servicer. When a third party bidder doesn't go over the bank's maximum bid then it goes back to the bank that foreclosed. Nothing you can do about that.

If you want them that bad bid on them at the auction, you'll just have to pay cash and close in less than 24 hours with no title insurance,inspections, or ability to see the inside of the property.

[Simon Campbell]

Pre-Foreclosure: If there are no heirs or the heirs cannot be found or will not deal with you, you can track down the attorney handling the probate or the estate and talk to him or her about buying the property. Be prepared here. Do you homework, have a figure in mind and how you will be paying for it already arranged.

Auction: If that backfires, your next option is to purchase the property at the auction. This requires more work. You need to check and see if the property will carry with it any back taxes, loans or other liens. Check and see if there is a redemption period. You will also need full payment generally within 24 hours.

[Donna S. Robinson]

Having done all of the above, pre-foreclosure, auction and REO, my preferred method is to WAIT until the auction is over, and the bank is getting the property back. Only in REO status will the bank be willing to talk to you and, depending on market circumstances, may be very negotiable. But you need to be an all cash buyer, with proof of funding.

If I wanted to target a specific neighborhood like you speak of, I'd do this: 1. try to find sellers when pre-foreclosure sets in. (This is where you have your only chance to do a creative deal.)

I'd check the ownership records at the assessors office, and find any surviving family. If they are not responsive, - and they probably won't be most of the time, then simply track the property through the auction process. (but I don't buy at auctions any more because bidders run prices up with no regard for true market value).

When house does go back to the bank at the auction, you can be one of the first to find out who that bank is. You can then make the bank an offer before the bank is even aware that they have taken possession of the property.

The auction has wiped out the liens, and a title search before closing will reveal any possible problems. Your offer should require clear title with no liens. (you must be all cash at this stage - with proof of funding to be effective).

Often you will be the very first one to contact the bank about the property. An all cash buyer has a distinct advantage with this method. The main difference between buying 1. pre-foreclosure, 2. at auction or 3. from the bank is that the buying strategy will vary from creative potential at stage 1, to all cash required for the best deal from the one seller - the bank - who will be in a position to negotiate.

Caution - we are probably going to see some serious dumping of hedge fund owned properties in the months ahead. Be very conservative with your offers, and do NOT over pay just to get in a deal. I expect that prices may take a significant dive before too much longer, as hedge fund - investment buyers are becoming net sellers at this point.

[Rick H.]

Simon - the only fly in the ointment with your strategy is that someone has to go to the trouble of opening a probate and front the costs. Despite rumors to the contrary, probate is not automatically started upon the death of an individual.

In my state (CA), county public administrators have the responsibility to probate the estates of deceased property owners if no one else has done so, however I have observed that they are too busy to look for new cases and only only take the ones where they see that their agencies will get paid. If a property has little equity or is over-encumbered, they see little reason to interfere with secured creditors (I.e., mortgage lenders) right to seek the collateral (foreclose on the property) in an attempt to satisfy the debt.

Therefore, an opportunity exists to find those anomaly properties and exploit the situation, control the process yourself from beginning to end and monetize it profitably. I've managed to find needles in haystacks on a serial basis for many years.

Adjust your radar screen to see what others don't.

[Account Closed]

Have you looked at these defaulting mortgages? I'd bet easily half are upside down and/or a reverse mortgage. Especially if we are talking seniors taking mortgages in the last 10 years. It's the rare heir or exec that will open a probate in order to deal with a property with no equity.

That being said, if the property is held by a trust and you can find a trustee to work with, there might be a play there.

In many cases foreclosure is the best way to clean up title and get a property back on the market.

[Account Closed]

Originally posted by @Donna S. Robinson:

When house does go back to the bank at the auction, you can be one of the first to find out who that bank is. You can then make the bank an offer before the bank is even aware that they have taken possession of the property.

Donna: Since the Bubble how many REOs have you bought by going directly to an institutional lender but before the lender has listed it?

[Donna S. Robinson]

Hi Marie, I would refer you to Tony Youngs - Nationally known real estate investor who is also a close friend of mine, and also lives here in Atlanta, GA. Tony works this strategy day in and day out in dozens of US cities. He is still using and teaching this strategy, and it is one of my personal favorites because of the fact that when you are an all cash buyer this is where the best prices are.

In recent years hedge fund investment companies have tilted the playing field but the fact is that between the pre-foreclosure stage to auction - to REO, only the REO stage produces the kinds of discounts that yield decent profits.

I've bought REO's from banks off and on for years. Mostly to flip to other investors, with the occasional rehab and retail. By the way, you can find Tony on his website: tonyyoungs.com - I am currently into a commercial real estate enterprise, and taking a break from SFR's waiting for prices to drop back to more realistic levels, which I believe is going to start showing up in the housing data virtually any day now. I think we're about to find out just how bad those hedge fund guys are as SFR investors. They have been dominating the auctions, and it makes no sense to bid against someone with free money in a suitcase.

I have nothing against other strategies, and I love creative strategies as well, but in the context of the original question in this string, his best shot is at the REO level. Plus when prices drop and inventory begins to rise, especially in a place like foreclosure ridden Florida, REOs will get cheaper pretty fast.

[Donna S. Robinson]

Oh and let me add that sometimes the bank will refer you to the likely listing agent, or tell you to contact the agent after the house is listed, but not in all cases. As usual, it depends on the house involved, the bank involved, etc. But it does happen from time to time and even if the bank does refer you to a listing agent, you may still be the first one to submit an offer.

[Keith Lewis]

In the event of "waiting" till auction, it doesnt make sense. I put money in the local county auction site only to be very disturbed and upset. I lost 3 times to Fannie who bid them into the stratosphere.

Simon: I like your first suggestion, I am going to call several of the attorneys handling the pre-foreclosure. Next question, they arent in MLS - how do I find them?

[Wayne Brooks]

@?

@Keith Lewis If there is a probate, and a probate attorney, then that's where to go. But in your cases you say the heirs are no where to be found, so I assume there is no probate. The foreclosing attorneys will be useless, as they don't track down borrowers. They send summons to the last address on the bank's file, and to the property. They also have no authority to negotiate anything, as the bank doesn't own the property, and they have no idea where the loss mitigation dept is, even if you could locate an heir.

[Walt Payne]

@Donna S. Robinson REOs are already starting to sit longer. But partly because banks haven't figured out that the game has reverted to the old rules, meaning us little guys are their best bet to recoup something and we want to make a profit.

[Keith Lewis]

After more research, several of them seem to be reverse mortgages. Any tricks to strategic contacts for acquiring these? Keep in mind, 55+ community, older people. Some have heirs and surprisingly, some dont.

[Wayne Brooks]

Keith, again without an heir or PR there is no deal to be had. If you can locate them, and the RM is upside down, they're all FHA insured, and FHA will only accept 95% of an FHA appraisal, in a short sale.

[Account Closed]

Originally posted by @Keith Lewis:

After more research, several of them seem to be reverse mortgages. Any tricks to strategic contacts for acquiring these? Keep in mind, 55+ community, older people. Some have heirs and surprisingly, some dont.

Reverse mortgages are insured loans. Lenders have to accept a payoff of 95% of current FMV on RMs. So if it works for you to buy at 95% of FMV, then you'd need to work with the seller (typically an estate or trustee). If there is no admin or exec, it's probably not going to happen. The property will go to foreclosure. There is no incentive for heirs to manage a short sale when the sale won't even pay for court expenses. However, if the property is held in a trust, and if you can find a trustee to sell to you, that may work.

I disagree with Donna above that you will ever be able to buy any of the properties you are seeing before the lender assigns it to a manager and lists it with an agent. Conveniently, in spite of a long post in response to my question, she didn't answer whether or not she had done such an REO purchase since 2008. I suspect not. But she's welcome to chime in with an example that supports her suggestion.

There's no such thing as dying with no heirs. It's just a matter of degrees. There are professional heir hunters combing probate files and death records in every state, every day of the week. If someone dies with assets, those heir hunters find the heirs in order to help them claim the inheritance and get a share. You're seeing no heirs because there is no inheritance. :)

[Simon Campbell]

@Keith Lewis you asked about where to find them if they are not in the MLS. If they were in the MLS, then their the heirs want to sell and problem solved. For non-listed properties, keep an eye open for abandoned properties. You can also correlate the obituary notices with county property records.