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Real Estate
Investing Guide for Beginners: Repossessions
By Jeanette Joy Fisher
Although the repossession
market seemed dried up last year, houses are
beginning to appear on foreclosed lists again.
Lender Rob Kramarz with Nationwide Mortgage (www.sweetloan.info)
says that "this may be the beginning of another
real estate investor boom."
If you're new to real estate investing, here is a
basic guide about repossessions.
Where to Find Repo
Listing Information
Some real estate agents try to discourage you from
repos and switch you to multiple listed homes. Do
not listen to negative remarks about how hard it
is to find a good deal. Find another agent.
Paying a listing service to mail you lists of
repossessed properties is a waste of money. Most
often, by the time you get these lists, the houses
are already sold. Many websites listing
foreclosures thrive on the web with real lists. (www.money4investors.com)
Look for great bargain properties for sale by HUD,
VA, Freddie Mac, Fannie Mae, and Bank-REOs
(acronym for real estate owned).
Most Common Government-Owned Repos: HUD
In most areas, new HUD listings post online late
Thursday night or Friday morning. New "Daily's,"
homes previously sold which fell out of escrow,
post Saturday morning. Properties not sold during
the bid time stay listed as daily's. Bids, due by
the following Tuesday at midnight, must be
submitted by a real estate agent who has completed
HUD registration.
Don't waste your time
using an agent who is not familiar with selling
HUD homes. Any mistake causes the bid to be
rejected. Don't use an agent who says you must bid
way over minimum bid. Find an agent specializing
in HUD homes who wants to work with you on your
terms. Many bargain HUD homes do sell for far more
than the minimum bid. Hold out for the one
property which doesn't get overbid.
Rely on your gut instinct and don't let your real
estate agent unduly influence you. It is not a
difficult process for your agent to make a
computer bid. You need an agent willing to make a
few bids to get a successful bid. This is like
winning a lottery, with the odds in your favor.
Bids must have a lender's loan commitment
statement. Lenders unfamiliar with HUD
requirements also waste your time. Any mistake
causes you to lose the purchase. Not all lenders
understand HUD's bid, finance, and purchase
process.
When placing a HUD bid, raise your offering bid to
cover some of your closing costs. This means you
get HUD to pay your closing costs and save
out-of-pocket expenses. Also, the higher sales
price impacts the market comparable sales in your
favor for resale later. Your purchase price
influences the values of the market area. Keeping
prices higher for active sales during your
renovation time protects your investment
potential.
Veterans Administration
Usually cleaner than HUD repos, homes owned by the
Veterans Administration are also offered on a
bidding system through real estate agents. The VA
partially fixes up their repossessed homes. The VA
sometimes offers vendee (seller) financing with
few processing costs, low interest, and no
prepayment penalty. You do not have to be a
Veteran to buy these easy to qualify for homes.
Other Government-Owned Properties
Less known government agencies such as Fannie Mae,
Freddie Mac, FDIC, SBA, the IRS, and GSA list
repossessed properties on their individual web
sites. These properties, rarer than HUD and VA,
usually get cleaned and repaired before listing
with real estate agencies with sale prices closer
to market value.
Bank Owned Repossessions
Banks often offer their real estate owned (REO)
homes at bargain prices. Depending on the bank's
resale policy, conditions of the property, and
available financing, REO opportunities vary
widely. Several banks lend on their repos while
other banks just want out. Great financing becomes
possible through the banks who offer in-house
terms. Ask for no points, minimal loan costs, and
no prepayment penalties. Check with your local
lending institutions and find out how they market
their repossessions. Many of these bankers will
give you their web page listing available
property. Make friends with real estate agents who
specialize in listing bank-owned repossessions so
they will notify you of a new listing immediately.
For the beginning real
estate investor, repossessed properties offer a
great way to get started investing in real estate.
Copyright © 2006 Jeanette J. Fisher
Jeanette Fisher, college instructor, teaches
interior design psychology and real estate
investing.
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Guide for Beginners: Repossessions
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