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Article of the Month for February 2004 Printer friendly version

Foreclosures in the Hinterlands

Working foreclosures in the "boonies" is much more arduous (but, as a consequence, much more potentially profitable) than researching them in metropolitan areas. There's a total of 58 counties in California, but only 20 of them have a large enough population base to profitably support the time-saving, computerized, real property data and foreclosure notice services that are regularly subscribed to by most foreclosure buyers.

Because of their constant subscriber turnover most data services require a county population base of at least 1 million or more to be assured of a large enough market to profitably work. Even the state has relaxed some commonly required services in thinly populated counties.

Accordingly, county tax assessors in counties of less than 715,000 inhabitants can use their discretion in determining whether or not to make available to the public the specific property characteristics (# of bedrooms, baths, garage, square footage, year built, etc.) that they have on all properties in their files. [Calif. Revenue and Taxation Code 408.3]

In those instances where they don't have to, most county assessors choose not to make such information available without the current owner's permission. In other sparse areas they might give out the info - but only if they're paid a prohibitively high fee on a per item basis.

In these areas you'd be amazed at the absence of critical information that amateurs have to contend with. As a consequence they lack the confidence that such information would give them to aggressively bid against others. Fortunately for the pro, amateurs in rural areas can't simply subscribe to the 24 hour computerized data services via their home computers (like their city cousins do) or subscribe to the microfiche or CD-ROM services that Experian, Dataquick, or MetroScan regularly provide in the 20 largest counties. Even current appraisal information via AIRD or Damar is non-existent in the boonies.

That means that those few hardy souls who have taken the time and trouble to master the special research skills needed in such areas will have an unusual advantage over their local competition.

The profitability of working foreclosures is directly related to the number of local competitors one is faced with. Thankfully, most of them are part-timers, struggling on a very short shoestring. They quickly fall behind because of the gaps in their research skills, money, and escalating time pressures - and before too long they drop out of the business. The struggle is especially difficult for them when they have to do all the work themselves.

So the pro in the hinterlands has to learn how to efficiently ferret out and thoroughly screen all of the "good" foreclosures coming onto the market. A lot of the process involves title record searching at the county recorder's office...first to find the foreclosure and then to determine the priority or pecking order of the foreclosing lien.

Then figuring out each foreclosure's configuration without resorting to the iffy (and time-consuming) prospect of trying to get inside each one becomes vital. A reliable, almost bullet-proof method has to be developed to get the essential characteristics (such as the number of bedrooms and baths) in order to accurately determine the property's present market value.

You must arrive at the fixed up market value of each foreclosure you're tentatively interested in, very early in the game. With that figure in hand you can do a quick profit calculation and know whether or not you'd be wasting a lot of your precious time researching and driving past properties with little or no profit potential.

Information provided by this website is for informational purposes only and is not a substitute for professional advice. Please consult your investment advisor and/or attorney before entering into any transaction. Read our privacy policy.

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