Tag Archives: foreclosure

Lease Option Training

Lease Option training is found LIVE at www.REI-TV.com . Nick Cifonie teaches beginning real estate investors how to use “rent to own” strategies to make money with real estate, with no money down, and none of your own credit.

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Is it illegal for me to buy a foreclosure property in public auction if the house was owned by my parents?

My parents lost their house due to foreclosure. They currently live in it and I assume once the foreclosure goes through, they will be kicked out.

My question is..

How many days after the house is sold to the new owner in the auction will they have till eviction?

And if I were to buy the property at the auction, would there be any problems since I am the son of the original owners that foreclosed on the property?

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I have heard that some banks are willing to buy you out of your home if you buy their foreclosure. Any truth?

I have heard that some banks for willing to buy you out of your home if you will buy one of their foreclosure’s. Does anyone know if there is truth to this?

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if I buy a foreclosure in miami, fl what other fees will I have to pay besides the home?

I’m getting 40k and I want to buy a foreclosure in broward or dade. I want to know what type of closing costs and other fees I should be expecting with buying a 35k condo.

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How to buy foreclosure or aution houses?

Foreclosure or aution houses are flooding the market. Aren’t they cheaper in general? what are some of the pros and cons of buying these houses verses those that are on the market? How is the transaction differ than other purchases?
What are the advantages of buying foreclosure or auction houses?

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Housing Mortgage Market Review

The Housing Mortgage Market Review came out this month – you can see the original at http://www.pmi-us.com/PDF/may_10_pmi_hammr.html

Home sales rose in March.  The main reasons given are the homebuyer tax credit, rebound from the bad weather during the winter months and a better outlook for jobs and demographics. 

I expect that April sales looked good as well, though I am doubtful that this will continue into May.  Since the homebuyer tax credit ended in April, I expect that May sales will have fallen.  I also think that the continued turmoil in Europe is going to have an affect in the overall economy here and that will affect house sales.

It is also expected that house prices and interest rates will remain unchanged through this year. 

The chart that I found most interesting showed the percentage of mortgages that are ‘seriously delinquent’ (pg 5).  The trendlines on this chart show that more and more mortgages are headed into foreclosure – a trend which will definately hold down the housing prices in the future.

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Tony Youngs was great last night!

Here are some of my notes from his presentation:

  • Tony revealed 7 ways to profit from properties that are in foreclosure
  • Tony talked about the ‘Ghost Inventory’ – the properties that the banks have gotten back from foreclosures but have not yet listed.  There are over 700,000 properties in this ‘Ghost Inventory’.  The banks are afraid to list them all because the resultant glut on the market would drive all prices down dramatically.  Tony talked about how to find these properties and how to buy them
  • Tony talked about the ‘Hidden Market’ – those properties that are not listed and nobody knows they are for sale.  Again, he revealed how to find these and how to buy them
  • He also talked about what to do with the properties once you have bought them.  He gave options for when you don’t have the money to close, when you want to own for a short time and also when you want to hold long term but maximize your investment.

Register Now!

The replay will only be available for a few days.  Go NOW!

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Seller Financing is BAD – Right?

The real answer is ‘it depends’. It depends on the situation and the parties involved in the transaction. Let’s talk about it from the Seller’s perspective and the Buyer’s perspective. We’ll also talk about the investor’s perspective in each of these roles. Remember, I am an investor, not an accountant – please check with your own accountant to confirm how this would apply to your own situation!

For the purposes of our discussion, suppose that a house sells for $150K and the seller takes back $100K as a mortgage as part of the sale (the buyer pays the other $50K as cash to keep this simple). The Seller owned this property free and clear – or owed less than the net cash received. Say the note has an interest rate of 6%, interest only payments (or more), with a balloon payment of the outstanding balance in 15 years. This makes the payments equal $500 per month – assuming only the interest is paid.

Seller – The Good:

The Seller can reduce the amount of tax they pay on the sale. When the Seller ‘takes back paper’ at the sale, that part of the equity of the house is not counted towards their capital gain. As payments come in over time, the principal received in each tax period is considered a capital gain for that tax period. Since our note is interest only payments, the $100K capital gain will be deferred for 15 years. This means that a seller can lower the tax they would need to pay for the house sale – both immediately and possibly as a total over time.

The seller gains an income stream from the note. For the next 15 years, the Seller will have $500 each month to spend – minus ordinary income tax (which will depend on the Sellers financial situation). The Seller actually makes more money for the sale of the house. The total amount this Seller earns is $150K + 15 years * $6000/yr = $240K.

As an investor Seller, this kind of financing can help you stabilize your income stream and result in better returns on your initial investment. Also, by offering seller financing, you may be able to demand a higher sales price at the time of the sale.

Seller – The Bad:

The Seller is still ‘attached’ to the house for the length of time that the note is collateralized by the house. This can be bad if the quality of the house is suspect, or the neighborhood value is declining – as the house decays or the defects are discovered, the security for the note (the house) looses value. This can be countered by requiring a larger down payment, charging a higher interest rate or doing more qualifying of the Buyer. For example, a Buyer who lives in the property is generally more likely to maintain or improve the property while a non-occupying Buyer may not have the same incentive to maintain the property (and the renter likely has no incentive at all).

The Seller may not receive payments on time. Ultimately, the Seller can solve this by foreclosing – which is a process defined by the area where the house is located. For example, in Washington the foreclosure process takes about 4 months while in Oklahoma it averages about 7 months. During this time, the Seller will not receive payments and the house may be vacant or damaged. Again, the Seller can mitigate some of these risks by requiring larger down payments or charging higher interest rates. In our example, the $50K downpayment can mitigate some losses. For instance, if the payments stop and it takes a year to foreclose, the Seller will have lost out on $6K worth of payments. Since the foreclosure process is not free, let’s assume $10K cost (remember that the cost will depend on the location of the property).  This means that the Seller still has $34K in cash and now can resell the property. If the Seller can sell the house for more than $116K, then the Seller is still ahead (remember to also add the amount of payments that were received prior to the foreclosure). 

As a rehabber, I feel that investor sellers can also mitigate the quality / damage issues more easily than a homeowner. Part of a rehabber’s job is to manage the quality and costs of repairs and to focus our buying in areas of town that are more likely to appreciate.

Buyer – The Good:

It can be easier for a Buyer to qualify for the loan. Mostly because the lender has already qualified the property – the lender/seller agrees on the current value of the property and they have some history with the property’s quality. Additionally, many Sellers do not require as much documentation as an institutional lender would require to qualify the Buyer. Institutional lenders have a process that they use to qualify Buyers – this process is supposed to reduce the risk to the lender (the current economic situation was caused by a loosening of this process). Most sellers who do Seller Financing don’t have a process but instead do just enough to feel comfortable with the Buyer’s promise to pay.

Seller Financing can reduce the amount of money needed to buy a property. Some financing situations can result in zero down payment. For example, in a ‘subject to’ purchase, the seller may loan you all of their equity. For example, the seller may owe $100K on a house that is in disrepair. This house may require $20K of repairs and when fixed up may be worth $200K. A deal could be crafted for a total of $120K where the Buyer takes over payments on the $100K and owes the Seller $20K (to be paid when the Buyer completes repairs and refinances or sells the house).

Seller Financing allows an investor to buy a wider range of properties. An instituitonal lender may not qualify a property if it is in need of some serious rehab work. As an investor Buyer, this means that I may not be able to get a bank to lend me the money needed to buy the property (they may be more accomodating for construction loans, but there are limitations there as well).

Seller Financing allows an investor to hold more properties. Currently, institutional lenders limit the number of loans that a Buyer may have in their name. As an investor Buyer, this limits the number of properties you can own at any one time. The current limit is actually 10, but the qualifying process for more than 4 loans is very difficult – making a practical limit of 4 loans. Most Sellers don’t have similar limitations and Seller financing often does not show on a credit report, so this can be a nice way to avoid this limitation.

Buyer – The Bad:

It can be difficult to find a Seller that is willing to accept Seller Financing. The most common objection I hear is that they just want to cash out. When I dig deeper, often the resistance comes from not really understanding the good and bad aspects (Why did I write this article?!).

I hope this article helped you understand more about Seller Financing.  Please share your comments or experiences!

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Bandit Signs

To use them, or not – that is the question! 

Bandit signs are those small signs that are stuck up on telephone poles or staked into the ground.  They say things like “we buy houses” or “stop foreclosure”.  The plus side seems to be that people do call in response to them.  The negative side is they are often illegal.

Tulsa, as well as other cities, have ordinances that restrict the use of signs.  Bandit signs can bring you a fine of $100/day per sign. 

The questions are:

* would you call in response to one of these signs? 

*If you use them, have you been fined?

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