If you invest in real estate, or are interested in buying foreclosures and flipping them, you need the assistance of a real estate company. Although “flipping” a house sounds like a quick process, it is not as easy as it may seem.
However, it is realizable t to receive a healthy cash flow from buying and flipping homes. You just need to team up with a real estate company and concentrate your objectives in the pre-foreclosure marketplace.
Concentrate on Pre-foreclosure Properties
Pre-foreclosure, as it sounds, is the initial phase of the foreclosure process. During this period, the property is still owned; however, the bank has initiated foreclosure proceedings. Pre-foreclosue is done in response to default, or when a homeowner has missed paying his loan.
Pre-foreclosure can be a crucial time for both the lender and homeowner. Therefore, the situation gives an astute investor the chance to make a nice tidy sum of cash. Using the proper knowledge, you can obtain some amazing real estate bargains.
Before you start scoffing at this opportunity, you need to understand what a it represents. When a house is in pre-forclosure, nobody is making any payments to the lender. Ultimately, the property goes into foreclosure and the owner of the property receives a big blemish on his credit report.
Why Preforeclosure is a Good Opportunity for the Investor
As a result, when a property is in pre-foreclosure, the owner is frequently a motivated seller. This is simply a bad dream from which the owner wants to escape. If s/he can get rid of the real estate then, s/he can also get the bank off his back for the payments s/he owes. For this reason alone, it is usual to purchase a pre-foreclosure in relatively good condition and create as much as a 50% equity spread.
Foreclosures have been trending in the U.S. due to current economic uncertainties and bad mortgage loans. As a result, lenders at banks are more than willing to work with property owners in default as they want to avoid taking the real estate back. Therefore, a lender would rather liquidate a bad loan versus seizing the real estate.
If you are an investor, you can use a real estate company, to represent your interests in this regard. The real estate agent can also gather the needed paperwork for the transaction and schedule inspections and contractors. If your goal is to renovate the foreclosure purchase and sell it quickly, then you want to partner with a real estate firm.
Have the real estate company ask the bank for a discount on what is owed on a property’s payoff. If you use this technique, a big equity spread can be created on a home that is entirely maxed out with loans. Once you become familiarized with the reasons why lenders accept discounts, you will be able to get larger discounts in future pre-foreclosure negotiations. And during this process, especially when you are new in the area, having a real estate company to work with is a great option.
Buying and Flipping – Pre-foreclosure Sale Benefits
When you use a real estate company to buy a pre-foreclosure property, you basically are taking over the existing loan. Therefore, you don’t need to qualify for a loan or even have perfect credit. Other investment opportunities in real estate don’t offer this kind of latitude. A pre-foreclosure sale allows you to take title to a property and start making payments right away for the existing mortgage. [This may sound a little complicated. I suggest you to have an interview with an experienced realtor, so s/he can answer all your questions. ]
Plus, you will still receive the same appreciation, depreciation and tax benefits that other investors receive. However, you will not be personally liable for the property and mortgage. Therefore, you can partner with a real estate company to assist you in investing in this well-defined niche investment.
Evidently, several ways exist for making money in the real estate marketplace. However, compared to the other options, the pre-forclosure market makes it much simpler to buy lower-priced houses and resell them for a substantial profit. In addition, you get the opportunity to help out a homeowner who may be down on his luck financially. If you are just starting out investing in real estate, using a real estate company to help you invest in the pre-foreclosure market and make flips can reward you with solid returns.
What’s the basic process for pre-foreclosure?
If you want to see the very basic process flow for pre-foreclosures, here is the summary:
- Find and file properties: It’s important to get up-to-date pre-foreclosure information and act on it as quickly as possible.
- Confirm pre-foreclosure status: When a property enters pre-foreclosure, the owner usually has at least 2-3 months to reinstate the property by paying off the amount in default. The reinstatement stops the foreclosure process, so it’s important to find out if a property has been reinstated before proceeding.
- Check potential bargain: You need to find out as much as you can about the estimated market value of the property, how much is owed on the property and if the owner has any other liens against the property. This is all public information and you can research on your own or with some help from a real estate professional.
- Contact the owner in default: You or your real estate agent should initiate contact with the owner to express your interest in the property. Before you expend the time and effort to contact the owner, make sure you’re fully prepared to buy.
- Negotiate a purchase agreement: Once you have made contact with the owner, you should meet with them for further discussion about the property. As part of this meeting, or a later one, you should arrange to walk through the property to make sure it meets your criteria as a buyer. If you and the owner both agree to proceed, you need to negotiate the terms of a purchase.
- Close the deal: Once you’ve arrived at an agreement with the owner in default, the foreclosing lender and any other lien holders, you can put the agreement in writing. If you’re not familiar with how to draw up a purchase agreement, you should have a local real estate agent or real estate attorney help.
Use the services of a real estate company, during pre-foreclosure processes. Their marketing skills online and off-line can help you turn over the house more quickly. Again, a real estate company can assist you in finding contractors who can help you make any needed upgrades. Don’t undervalue the services of a real estate firm. You need this kind of assistance in order to make buying and flipping a more streamlined process.