Process of finding foreclosed properties

[Ben Sternberg]

Hey BP Community! I'd like to learn more about the general foreclosure process. I am a new investor and have found the market that I would like to invest in. Like most of us, I am looking for someones problem and hoping I can be the solution. I'd like to learn more about foreclosures and I am interested with some processes that people have. I have compiled a few questions but I'd like to connect as well as hear other strategies around buying short sales or bank owned properties.

1. Do you use a specific site for finding short sale opportunities?

2. Do you have a specific criteria when analyzing foreclosed properties?

3. Are there additional expenses when buying short sale or bank owned properties?

4. Can you finance a short sale? I do not have the cash to buy a property outright but can certainly afford a down payment.

5. What do you stay away from when analyzing these deals?

Hoping everyone is safe during these unprecedented times!

[Jonathan Greene]

You are commingling different types of distressed properties. Short sales are not foreclosures. The general foreclosure proceeding would be lis pendens (owner can't pay mortgage), short sale (owner hires an agent and works with the bank to sell for more than the upset value, amount owed), when the short sale doesn't work foreclosure proceedings have already begun and then it goes to courthouse steps auction and is a foreclosure property. If the upset value, amount owed, is higher than the value it won't sell at courthouse steps and then it goes back on the market, eventually, as an REO or on the MLS and sold through an auction site like Hubzu or Xome. It can work differently, but these are all different types of properties.

You can use a mortgage to buy a short sale and sometimes the bank that holds the note will have favorable funding options to put you back in. Some will want cash, but you have a chance to mortgage. Courthouse steps foreclosures are cash deals. Most REO deals prefer cash or private or hard money.

So, many new investors think foreclosures are good because they are priced lower, but they are disastrous options for first-time investors as the inspection ability and repairs requests are limited to none and foreclosures also often times come with tax liens and other liens that may all not be fully disclosed at the time of the auction.

If you are a first-time buyer and want distressed, you can look at HomePath properties which are Fannie Mae REO and they can provide a bit more protection to you as a buyer. Foreclosures and auction REO often have buyer premiums to pay, 5-10% of the sale price over the top. I hope that helps.