Where to Find Distressed Properties and Foreclosures

The MLS – Bank REO’s

Simple. These are properties that the bank now owns after the foreclosure process has run its course culminating in an unsuccessful attempt to auction off the property at a sheriffs sale.  Your local real estate agent can put together a list of properties in the price range you are looking for in about two minutes off the MLS.  Most of my purchases have been REO’s since they contain the least amount of headaches to obtain.

HUD Homes and Government Seized Repo Homes

Go to www.hud.gov or www.homesales.gov to find government owned properties in your target areas.  These areboarded up 237x300 Where to Find Distressed Properties and Foreclosures properties that Fannie Mae or Freddie Mac have insured and the homeowner defaulted on the mortgage.  I have purchased some heavily discounted HUD homes with almost no money down.  There is usually less competition for these homes as long as they are not scooped up by homeowners first during the priority bidding period.  If no one submits a suitable bid during the homeowner priority phase then the bids are opened up to investors.  Bid at least 30% less than their asking price.

VA Foreclosures

Go to www.ocwen.com or www.homesales.gov to find VA foreclosures.  VA foreclosures are properties that have loans that were guaranteed by the Department of Veterans Affairs.  It is a myth that you have to be a veteran to buy VA foreclosures.  The easiest way to understand VA foreclosures is that only veterans can get the loans needed to buy the properties when not in foreclosure, but after foreclosure, anybody can purchase the home. So in other words, if a VA home is foreclosed on, anybody can go ahead and purchase it; regardless of whether or not you are a veteran.  The process of purchasing a VA foreclosure is similar to that of buying a HUD foreclosure.

Sheriff’s Sales

These homes are in the final stages of the foreclosure process and are now being auctioned off on the court house steps prior to being returned to the bank. Once the property is returned to the bank it is called an REO.  Do you your homework here before buying at a sheriff’s sale.  First of all these properties are not available for viewing so build in enough margin to handle the worst case scenario when bidding.  You typically will need a 25% deposit just to bid and then the remainder of the funds in 24-48 hrs.  Also make sure to understand what position the lien that is being foreclosed upon is in.  It is possible to make some costly mistakes here if you do not know how to evaluate the liens that are in foreclosure and their position on the title.

Free Foreclosure Lists

There are no good free foreclosure lists out there.  You will have to pay for the good foreclosure lists that have updated weekly info that is sorted properly and logically.  These lists compile public record data from the courthouse of foreclosure lawsuits filed against the homeowner along with the relevant data associated with the mortgage.   There are investors who have made fortunes using these foreclosure lists to find homeowners in need of a helping hand as they sort through the short sale process in order to avoid foreclosure.  I only know of a few who are consistently successful with this approach.  I tried this for a year myself with no success.  Not my cup of tea.

Tax Foreclosures or Tax Sales

If you are looking to actually acquire property do not waste your time with tax sales.  Only about 2% of the tax liens obtained at the county tax sale will ever convert into owning that property free and clear.  Most tax liens are paid off by the bank or homeowner before expiration of the redemption period.  Tax sales do offer a great opportunity to earn a great rate of return on your money though.  Depending on the state this can be anywhere from 12-24% per annum.

Real Estate Investment Clubs

These clubs can be a great resource for rehabbers and investors looking for distressed properties to buy.  Try a few different ones in your area because they are all not the same.  Wholesalers and investors with excess inventory will come to these meetings to advertise their properties for sale to other investors.  Real estate investment clubs are also a great place to find bird dogs that will locate properties for you within a certain criteria for a finder’s fee.  Finders fees can range anywhere from of $1K – $5K if you wind up buying the property.

Real Estate Auctions

Bank REO’s are typically sold through real estate brokers commissioned by the bank.  But after some time on the market without any success, some banks will turn to auction clearing houses to unload their non-selling properties.  Banks will either sell their REO’s individually or some cases when the bank has many REO properties in the same location, the bank may opt to perform a bulk sale of all their properties at once. Bulk sales usually range anywhere from $2MM to $10MM and can include 50 – 200 properties.  For the well prepared and well financed investor, this can be an incredible opportunity.  During the insane property value explosion in the mid 2000’s where any monkey could make money in real estate, real estate auction prices where run up by novice investors that were overpaying just they could get into the game.  Now that many of the novice investors have left the real estate market, one can obtain a property at a good discount at many auctions today.  Do your research and attend a local auction.  You never know when you’ll get lucky.

Place an “I Buy Ugly Houses” Ad in the Paper

Place this ad in the paper and you will get flooded with phone calls of investors that are in over their head and want out fast.   Many of these deals will not be that great – but if you can learn how to make a short sale happen this could be a profitable avenue to pursue.

Probate Property Deals

Regularly visit your local courthouse to research a list of wills submitted for probate. In your research, pay attention to three vital information: the deceased, the beneficiaries and the executor. Then dig up on records of deeds to properties held in their name. If this sounds like a lot of tedious work, you’re right.  This is similar to the kind of legwork an investor would have to do when looking for pre-foreclosure leads at the courthouse. Just like there are pre-foreclosure lists for sale, there are prepackaged probate lists organized by county that provide all the contact information you need to start mailing out your postcards. Google “probate lists” and go with some of the big players instead of spending all your time at the courthouse weeding through files.

Networking

Go to real estate investment club meetings, call ads in the paper, talk to hard money lenders, and talk to property managers in your area and let them all know that you are an active rehabber looking for properties to buy.  Make sure everyone knows that you are willing to pay a finders fee for good leads.  It took a couple years for my partner and I to get our name out there as active rehabbers and real estate investors, but it was through this process of active networking that we obtained some of our best deals including $40K wholesale flip in one month.

There are many different avenues investors can pursue in search of that perfect fixer upper.  With that said, the easiest and fastest way to consistently find properties is through your local real estate agent.  Bank owned properties have no tenants that still need to be evicted, no back taxes to pay, no liens to worry about, and no endless waiting for a short sale that does not materialize.  Read the article on “How to Buy Foreclosures, REO’s, and HUD Properties without ever seeing them!” to learn how to place offers without even seeing the inside of the home.  Once you develop your system the rest is easy.

Just like the guy who broke into my basement, if you are as determined as a crack head you’re almost guaranteed to succeed.

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