Title Holding Trust
50 State Foreclosure Basics
75+ Yrs Interest Rates
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(An Overall View)
by Ward Hanigan
Regardless of your home state location, the following themes will come to the fore when considering participating in foreclosing investing. This is not an all-inclusive checklist since your particular state will have additional procedures or requirements unique to your area.
- RESEARCH (3 choices)
- Find the new foreclosures by yourself, or by hired help, or via a reliable subscription service.
- You could personally do your own 5 hour daily search for the notices at the county recorder’s office, or
- You could hire someone to do a daily search of public records for about $1,500/mo, or
- You could get the notices the cheapest, most efficient way by downloading them from an online foreclosure notice service for about $80 - $100/month. The list of such services for Southern California fluctuates, but currently these are the main companies:
- Select the most likely prospects from your daily downloads:
- Establish the available equity (value less cost basis)
- Find the current, fair market value of the property (see LOCATE formula),
- Subtract your cost basis (see BEST BID formula).
- Ignore notices that pertain to:
- Recent loans (<5 years) that probably exceed 75% LTV.
- Low owner-equity properties like timeshares, etc.
- Deals that require more cash than what you have to invest.
- Unfamiliar condo projects with wide value ranges.
- Hazardous/negative areas that are difficult to resell:
(1) Flood, fire, subsidence, septic system failures, loud/noisy areas, fumes/odors, etc.
- Slower marketing areas (during a retreating Buyer’s market).
- Research the title record and determine ALL present liens (BOTH voluntary and involuntary) and their relative priorities (see Researching The Title Record).
- Your own funds:
- Cash on hand
- Instantly available via pre-established lines of credit.
- Other People’s Money (OPM)
- Loan vs. investment?
- Secured vs. unsecured?
- Private vs. public offering (solicitation regulations)
- Time frame?
- Record keeping, periodic reports, tax return elections
- Before the auction/sale (from the defaulting homeowner/trustor):
- Get title and current possession for a relatively low cash outlay.
- “Due on Sale” acceleration possibility.
- Nullified discount (no liens wiped off).
- At the auction/sale (from the trustee):
- Generally the “best potential buy” . . . but it requires ALL cash bid.
- You get a deed absolute, rather than a deed of defeasance.
- Get title immediately…but not necessarily possession.
- After the auction/sale (from the beneficiary)
- Apt to get slightly better-than-market loan terms, but only a marginal price break from an REO owner on a single property. Much better buys occur when buying a bundle of REOs.
- If you want to buy just one REO property at a time, then your best deal will come from an out-of-county private beneficiary who is stuck with an REO in your county, in rundown condition, occupied with a non-paying squatter, with a remaining senior lien costing a thousand dollars or more per month.
- The informal method. Grant the occupant extra time to move out.
- Formal legal means as a last resort (filing an Unlawful Detainer Action).
- Pre-arranged, immediate insurance binder covering fire, vandalism and liability.
- HOLDING PERIOD CONCERNS
- Extent of rehabbing, getting bids, job supervision, sub contractor releases, etc.
- Rental management, rental averages (www.rentometer.com), etc.
- Positive/negative cash flow management.
- CASHING OUT (When reselling in the retail market)
- Finding financing for your Buyer
- Local, first-time-buyer assistance programs (City and County programs)
- Get referrals of local, conscientious loan brokers
- Reselling techniques
F lyers (letter size and door hanger type)
O pen house on Sunday (Noon to 4pm)
A dvertisements in main newspaper (both “For Sale” and “Open House”)
M ultiple Listing Service inclusion (usually $350 flat fee service)
S ign on property and bootleg signs on Sunday directing Open House traffic to your property.