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Archive for September 1st, 2010

The Art Of Buying Distressed Real Estate

Real estate turning into a distressed property through being confiscated by the lender or mortgagee due to the nonpayment of taxes or mortgage amounts loans is an unfortunate outcome that no investor wants to happen. However when it happens the mortgagee or the legal authorities become the owners and the previous owner or the debtor has no say in any matter related to the property. The legal authority for instance a bank has all the right to hold back such properties and take absolute charge of it from the owner. These properties are later sold in the market by the bank holding it. The selling price of the property is much less than its actual estimate but it helps the lender to recover most of its dues occasionally giving them a little profit too. This is called ‘foreclosure’ or ‘mortgageeinpossession sale’.

People often think that buying such a property is always profitable. Yes it is but only if you pay due attention to all its implications before you buy it. There are a lot of things and procedures that are to be kept in mind before investing in such properties. Here’s how you can actually invest your money in distressed properties and expect good yields on them.

Searching and locating such properties:
Almost every bank faces such situations and have to resell properties confiscated by it. Keeping track of such banks and searching on the Internet could be important sources of your information. The best thing would be approaching a Realtor who has specialized in such properties. Actually seeing such properties for yourself gives you a comprehensive idea of the property. You can picture the situations the previous owner was in and situations that can occur. For example if you assume that after you buy a certain heldback property you would give it on lease you very well have to forecast the leasing prospect. There is a possibility that the property is not worth renting and that’s why the previous owner could not pay the dues . Maybe you would like to live on that property or start a new business there. Again you would have to evaluate the surroundings and neighborhood for yourself. Probably it is not that exciting and could be the reason for the previous owner to incur the losses. Therefore it is important to assess the neighborhood of the property by seeing it for yourself.

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Hiring a specialized Realtor:
A Realtor always has the best knowledge about these kinds of deal and can very well guide you on buying such properties. Paying him his commission for the deal is always worth. He knows the true worth of such properties because he has links with lending banks and other financial institutions who hold properties like this.

Analyzing the paper and documents of the properties:
Be very cautious while reading through the documents. The documents will tell you why the previous owner fell back on paying the charges. Secondly they will give you the outstanding amount details square feet area of the property owner’s name what was done on it etc. These are very important details one mustn’t ignore.

Take a second opinion:
If you are in a dilemma about buying such properties preferably take a second opinion. This could be from a friend another agent Realtor or a Realtor from the neighborhood of the property. This will help you clear a lot of mental cobwebs and come to a definite decision.

Buying the properties:
After you and your Realtor have analyzed the papers thoroughly you can now negotiate on the price with the authorities who are the new owners of the property if you are the sole/first buyer. However if the property is to be bid the highest bidder would have the right to take it away. Remember always make your payments in the form of a check. Besides make sure that the previous owner has no more links with the property and the previous owners or mortgagees have cleared their names from the property and you are the sole legal owner now.

Written by: JS
Date Written: 04/07/08
Reviewer Assigned by: David
Reviewed by: HS
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About the writer:  Virtual Real Estate Investing Experts Kim and Charles Petty have been involved in over 700 real estate transactions in the last 9 years and are the creators of the Ultimate Turn Key Virtual Real Estate Investing Systems for investors all around the world who want to take advantage of the awesome profit opportunities in today’s real estate market. They are the worlds leading experts on Virtual Real Estate Investing. For a FREE Special Report and Audio on how you too can make Six or Seven Figures A Year Buying and Selling Properties across the USA abroad go to http://www.VirtualRealEstateInvestingProfits.com or call 18003119228