Before you begin searching for a foreclosure as an Investment, the first thing to do is to check your own financial status and make sure you can prequalify for a mortgage (or have other funding available).
The best resource for learning and building up your credit score is the source itself:
If your credit score looks good but you anticipate filling out quite a few legal documents or loan applications, take the extra measure of insuring yourself AGAINST identify theft. Lifelock™
has fast become the industry standard.
There are a host of mortgage companies to choose from, but after the Subprime Mortgage fallout and Fannie Mae/ Freddie Mac’s tenuous state, it’s probably best to stick with a brand name.
Lending Tree, in this situation, is a perfect choice. Banks bid on you, giving you the power to take the most favorable terms.
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If you are an out-of-towner, or have been relatively isolated in your neighborhood for sometime, I’d recommend getting familiar with the median home prices in the area you are searching. The Philadelphia Inquirer put together a fantastic interactive map some time ago that I find particularly useful:
By every economist’s standard, the housing bubble has yet to completely burst and the falling real estate market will only ensure that those who avoided variable-rate home loans should be able to qualify for solid loan rates and have open season on foreclosures, bank sales and FSBOs.
During a recession, finding foreclosures is often as simple as calling up your local real estate agent, visiting a local bank, or submitting your search into the browser bar.
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For Philadelphia, the first place I would search is:
Four times a month, the Philadelphia sheriff’s office conducts sheriff’
s sales, which are a way for mortgage companies and other financial institutions and the government to recover debts owed to them.
Often, the properties in question are sold to new owners. There are mortgage-foreclosure sales for mortgage companies, which are looking to recoup money from homeowners who have defaulted on their home loans.
Delinquent tax sales are how the city collects unpaid real-estate taxes, water and sewer bills. There are also twice-a-month tax-lien sales that cover a variety of liens on properties.
Note: Roughly a third of the mortgage foreclosures and one half of tax lien cases result in properties being sold.
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The Downside To the Sheriff Sale Website…
is that it doesn’t feature pictures or any advanced details about the properties.
If you wanted advanced information, it’s more than worth the investment to look into the two big foreclosure websites and set up monitors by geographic area (down to zip code). Check out:
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Government Auctions
Occasionally the Government repossess a VA-Loan or HUD home for auction. Unlike foreclosures, there aren’t the hassles of dealing with the homeowner or potentially negotiating settlement terms. The buying process is also fairly simple. State/ City listings can be searched here:
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Many pre-foreclosure homes that were once offered as short sales end up as foreclosures, which are eventually deeded to the bank. These are properties to be wary of, and to inspect thoroughly prior to purchase. Any of the following problems could exist:
- Homeowner vandalized the property.
- Homeowner stripped the foreclosed home’s assets (wiring, light fixtures, etc.)
- Bank refuses to accept a balance less than the present value of the mortgage.
- Home may be located in a dicey neighborhood.
- The homeowner didn’t qualify for a short sale.
For every story of a fantastic rehab and flip foreclosure purchase, there are at least two that spiraled into investment nightmares. DO YOUR HOMEWORK. Research every property as exhaustively as you can before buying it.
Don’t be intimidated by naysayers and sites devoted to horrible foreclosure purchases.
There are diamonds in the rough, and Philadelphia is The Next Great City.
Housing prices are already low, the city is attracting young talent put off by the expense of living in New York or Washington D.C., and commercial real estate in Center City is developing at an all-time high.
Buying in, rehabbing and reselling a foreclosed property in Philadelphia might just be the best investment ROI you ever make.
