How to get properties from the bank

Question

I've been reading on here for some time now, planning, watching and saving.  Here are some questions I've come up with based on reading here and there.

Once you've located a property and searched public records to find out who owns it, how do you go and get it from them?  For me, I've been keeping an eye on other condos in my area, because I feel better working with something I know a bit.  I've located several that are in different situations - some in the early stages of foreclosure, others have already been foreclosed on, some have been empty for months.

My question is pretty simple...when you find something like that, can you just call up the bank and say, 'I'm interested in the property at (wherever)?'  My brother is a commercial lender in the area, and he has a lot of resources for things like this.  Do I need to have him call up one of his realtor friends to call the bank for me?  How does it usually work?

Thanks,

-Mike

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[EDITED BY MODERATOR TO CONSOLIDATE EIGHT POSTS INTO ONE]

Check for Notices of Default at your county courthouse . . . get the homeowner's name and address . . . then go knock on the homeowner's door personally.

If the home has equity you might be able to put it under contract and "wholesale" the property to another investor.

f the home has equity, you might be able to negotiate a short slae with the bank, and find a retail buyer and create a small spread (profit).

Bottom line . . . easire opportunity for profit if you can nab the property BEFORE the bank takes it back.

oooops . . . sorry about all the typos . . . fingers not coordinating with the brain.

TIP: Before you go knocking on the homeowner's door, take the time to learn about the foreclosure laws in YOUR state . . .

For example: judicial vs. non-judicial foreclosure, foreclosure timeline, right of redemption

Then learn about all of the ways a homeowner can save their home . . . go to the door armed with KNOWLEDGE . . .

Your first priority should be to help the homeowner SAVE their house . . . yes, you read that correctly, give freely of your knowledge to help the homeowner save their house . . .

Most of the real estate investors who knock on homeowner's doors do so with the singular intention of profiting from the person's problems . . . and that is very obvious to the homeowner.

By HONESTLY trying to help the homeowner first you gain their trust and confidence . . . if circumstances are such that they cannot save their house, who do you think will have the first opportunity to do some kind of deal with them . . . obviously YOU.

If the homeowner has equity, you might be able to structure a "subject to" deal . . . that means you take over the homeowner payments . . . notice that I did not say that you ASSUME the homeowner's payments.

But once again, don't screw the homeowner and agree to take over his/her payments if you have NO intention of doing so . . . because using the subject to technique the loan is STILL in the homeowners name . . . so if you don't make payments, you are damaging their credit.

If you take over a house "subject to" there may be back payments and other liens to payoff . . . and if the homeowner has a lot of equity, you will need to pay the homeowner a portion of their equity . . . you retain the balance of the homeowner's equity as your "fee" for getting them out of their jam and allowing them to move on with their life.

You do NOT have to qualify for a bank loan because you have simply agreed (in writing) to take over the homeowners payments . . .

You need to be aware that technically the lender/bank could possibly "call the loan" . . . there is a provision in most loans called the "due on sale clause", meaning that if the house is sold or the ownership is transferred in any way, that the lender can call the loan immediatley due and payable.

However, it is very rare that a lender will call a loan, particularly now that there are so many foreclosures, if you make the house payments on time the chances are slim to none that the bank will care or even notice.

So what can you do if you take over a house "subject to" . . . there are many options:

One, you can live in it if you don't already own a home and if you can afford to make the monthly payments . . .

Two, you can sell the house to someone else for more than you paid for it . . . they can either cash you out and you make a one-time lump sum profit -or- you can have the new homeowner make the payments for a period of time (perhaps 12 to 24 months) while they get their credit in order, then they get new financing and pay you off as well as the underlying mortgage . . . in the meantime however, you make a small monthly cash flow (i.e. the difference in the mortgage payment with the higher purchase price vs. the mortgage payment the original homeowner was making) . . . this could easily net you a $200 to $300 per month differential . . .

Do the math with the previous example . . . 10 houses at $200 to $300 net cash flow each . . . could net you $2000 to $3000 per month

You would have sold the house to the new buyers on a lease option contract, so all maintenance and repairs would be at their trouble and expense . . .

The downside you need to consider is what if the lease option buyer doesn't continue to make their monthly payments . . . YUK !!

Well what I didn't tell you is that before the lease option buyer moved in, they gave you a "non-refundable" option fee of several thousand dollars (might have be anywhere from $5000 to $30,000) . . . that should be enough to offset any losses while you evict them, clean the place up and find another lease option buyer with cash up front.

OK . . . so what if the homeowner in default has no equity . . . do you walk away . . . not usually.

You may have hjeard the term "short sale" . . . it has become a very popeular technique lately for homeowners who are "upside down" down in their home . . .

NO, I don't mean standing on their heads . . . I mean that they owe the mortgage company MORE than what their house is worth . . . actually this phenomenon has become an epidemic . . . as housing prices in many parts of the country have literally crashed, hundreds of thousand of homeowners have discovered that they cannot sell their house for enough to pay off the bank . . . the the new found popularity of the short sale.

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Therefore in my humble opinion, the best time to buy a house is before it goes back to the bank . . . you have sooooooo many more opportunities for turning a profit . . . I only touched on just a few ways to make money.

Good luck . . . now go buy an investment house !!!!!

Carmelita Sams · Answer

Hi Mike,

It depends on what your state's foreclosure process is. I'm in Illinois, which utilizes the judicial process. (hope I termed that correctly!) 8)

Anyway I'll try to answer your question in three parts.

Early stage: The property  still belongs to the owner. Assuming you have
contact with him/her, have them sign an "Authorization to Release Information" form. The lender won't talk to you about the deal unless they
have permission from the owner. Then you can begin negotiating. You'll want to ask for the Loss Mitigation Dept. Sometimes it'll help if you just ask the lender what needs to be done to make the deal work.

Already foreclosed: Now the property is an REO. However here in Illinois
there is a time period of about 30 to 45 days, between the actual sale date and the court approval of the sale, where you still might be able to negotiate with the lender before it gets listed. Of course once it's listed then you have to deal with the listing agent.

Empty for months: If the property's been vacant for a while, that doesn't
necessarily mean that it's an Reo. Have a Realtor friend look it up to see if it's listed. If not, then leave a note at the property in question that you have an interest in buying it. Talk to the neighbors to see if they know the owner's whereabouts. Leave them with your contact info.

In summary it takes a lot of patience dealing with the lenders and some savvy detective work finding the owners. If your budget allows I would subscribe to a reputable foreclosure service.

Hope this helps and GOOD LUCK!!!

Manish Patel · Answer

Pre-foreclosure can be extremely profitable....if the numbers work see if you can contact the current owner and work out a "subject to" or some other creative deal...

Bryan . · Answer

I was chasing a REO property and it does take a while. The bank would not sell directly to me, but took my name and info and gave it to the listing agent when it went on the market. I had first shot at it but they were not yet realistic. I may be able to pick it up in mid winter  :wink:

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And what if the property isn't listed yet?  Can you do anything then, or just wait?  Another thread on here seemed to indicate that it might take a while, for various reasons.

Thanks for the reply!

Jon Holdman · Answer

You can certainly try calling the bank.  Even if they don't want to deal with you directly, they will direct you to the agent they'll use to list it.

Jon