Foreclosure Investing For Dummies

Looking to kick start your own property management career? Check out Foreclosure Investing For Dummies, which will get you started buying foreclosed properties to turn into your own income property!

In this book, you'll learn to navigate the complexities of home auctions, deal with emotional former homeowners, and how to handle renovations. You'll also get a heads-up on the foreclosure laws in all 50 states so you don't accidentally run afoul of any complicated regulations.

Foreclosure Investing For Dummies shows you how to:

• Locate properties for sale and identify associated opportunities and risks
• Buy properties below market value at auction, from lending institutions, and from government agencies
• Fix up, renovate, and sell or lease your new property for a profit

This hands-on guide can help anyone make foreclosure investing work. So, grab a copy of Foreclosure Investing For Dummies, roll up your sleeves, and get going!

Ralph R. Roberts has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 4

Beyond the Book 4

Where to Go from Here 4

Part 1: Prepping Yourself for Foreclosure Success 7

Chapter 1: Wrapping Your Brain around Foreclosure Investing 9

Investigating the Foreclosure Process from Start to Finish 10

Picking Your Point of Entry 12

Scooping other investors during the pre-auction stage 12

Bidding on properties at foreclosure auctions 13

Buying properties after the sale 15

Assembling a Team of Experts and Advisers 16

Getting Your Financial Ducks in a Row 17

Finding Foreclosures and Seized Properties 18

Performing Your Due Diligence 19

Investigating the property’s title and other documentation 20

Inspecting the property with your own eyes 21

Guesstimating a property’s true value 22

Investigating the situation and the homeowners 22

Setting and Sticking To Your Maximum Bid 23

Taking Possession of the Property 24

Completing the essential paperwork 24

Paying property taxes and insurance 25

Persuading the current residents to move on 26

Cashing Out: Realizing Your Profit 26

Repairing and renovating the property to maximize its value 27

Marketing and selling to get top dollar 27

Cashing out equity by refinancing 28

Profiting in other ways 28

Chapter 2: Getting Up to Speed on the Foreclosure Process 29

Identifying the Foreclosure Process in Your Area 30

Foreclosure by trustee sale 30

Foreclosure by judicial sale 31

Exploring the Missed-Payment Notice Stage 31

Getting Serious: The Notice of Default 32

Proceeding to the Foreclosure Sale 32

Halting the Foreclosure Process 33

Reinstating the mortgage 34

Requesting and receiving a forbearance 35

Mortgage modification or repayment plan 35

Filing for bankruptcy 36

Agreeing to a deed in lieu of foreclosure 36

Getting one last chance during the redemption period 37

Finalizing the Foreclosure: Ushering the Previous Owners Out the Door 39

Chapter 3: Picking Your Point of Entry in the Foreclosure Process 41

Dipping In at the Pre-Auction Stage 42

Exploring the pros and cons of pre-auction foreclosures 42

Guiding homeowners to good decisions 43

Dealing with anger and angst 44

Assessing your ability to deal with pre-auction scenarios 45

Pursuing Foreclosure Notices 46

Knowing the benefits of waiting for the foreclosure notice 47

Weighing the drawbacks of waiting for the foreclosure notice 48

Wrapping up your deal before the sale 48

Bidding for a Property at a Foreclosure Auction 49

Weighing the pros and cons of buying at auctions 50

Setting a maximum bid well in advance 51

Putting on your poker face 51

Acquiring Properties after the Auction 52

Scoping out REO properties 52

Finding and buying government properties 53

Buying properties from other investors 54

Waiting Out the Redemption Period — If Necessary 54

Part 2: Laying the Groundwork for Maximized Profit and Minimized Risk 57

Chapter 4: Building a Powerful Foreclosure Investment Team 59

Lawyering Up with a Real Estate Attorney 60

Teaming Up with a Good Moneyman or Woman 61

Consulting a Title Company to Cover Your Back 63

Hiring a Tax-Savvy Accountant 64

Lining Up a Home Inspector 65

Contacting Contractors and Subcontractors 66

Hiring a general contractor — or not 67

Tracking down top-notch contractors and subcontractors 68

Contracting with contractors and subcontractors 68

Finding skilled and unskilled help 70

Insuring your helping hands 70

Selling Your Property for Top Dollar through a Seller’s Agent 71

Recognizing the value of a seller’s agent 72

Picking an agent with the right stuff 73

Assessing the Pros and Cons of Partnerships 74

Chapter 5: Filling Your Foreclosure Tank with Financial Fuel 77

Estimating Your Cash Needs 78

Finding a Cash Stash: Knowing Your Financing Options 79

Financing with Hard-Money and Gap Loans 81

Weighing the pros and cons of hard money 81

Making up the difference with a gap loan 83

Finding private lenders 83

Partnering with Investors 84

Shaking Your Piggy Bank: Tapping Your Own Resources 84

Examining the pros and cons of using your own money 85

Totaling your sources of investment capital 85

Planning for contingencies 88

Financing Your Venture with Conventional Loans 88

Exploring conventional loan types 89

Making yourself look good on paper 90

Gathering the paperwork and records you need 93

Comparison Shopping for Low-Cost Loans 93

Chapter 6: Networking Your Way to Foreclosure Success 95

Grasping the Power of Networking 96

Generating leads on profitable pre-auction properties 96

Securing your financing 97

Tracking down reliable, affordable professionals 98

Selling your house for more money in less time 98

Realizing the Importance of Being Good 99

Acting with integrity — always 99

Investing in quality craftsmanship 100

Building thriving communities 100

Marketing Yourself 101

Gathering your marketing tools 101

Starting with your inner circle 103

Keeping in touch: A daily chore 103

Managing Contact Information 104

Rewarding Good Deeds and Good Leads 104

Part 3: Creating Win–Win Situations in Pre-Foreclosure (Before Auction) 107

Chapter 7: Discovering Homeowners Facing Foreclosure 109

Networking Your Way to Promising Properties 110

Identifying your personal lead generators 110

Getting the word out on the streets 114

Scoping Out the Neighborhood for Dontwanners 114

Searching for FSBO Properties 115

Finding Foreclosure Notices 116

Tracking down local publications 116

Getting on the mailing list 117

Subscribing to commercial foreclosure information services or not 117

Deciphering a foreclosure notice 118

Teaming Up with Attorneys to Help Distressed Clients Sell Their Homes 119

Acquiring properties in probate 119

Adopting homes orphaned by divorce 121

Teaming up with bankruptcy attorneys 122

Chapter 8: Performing Your Due Diligence 125

Collecting Essential Information about the Property 126

Honing your title acquisition and reading skills 126

Picking up details from the foreclosure notice 127

Digging up details at the Register of Deeds office 132

Gathering tax information at the assessor’s office 138

Getting your hands on the property worksheet 138

Gathering additional information 139

Doing Your Fieldwork: Inspecting the Property 140

Doing a drive-by, walk-around inspection 140

Snapping some photos 142

Assembling Your Property Dossier: A Checklist 142

Recognizing the Most Common and Serious Red Flags and Big Mistakes 144

Chapter 9: Contacting the Homeowners and Lenders 145

Scheduling Your Foreclosure Activities 146

Contacting the Homeowners Directly 150

Tracking down the homeowners 150

Kicking off your mail campaign 151

Getting in touch over the phone 156

Adding the Homeowners’ Profile to Your Property Dossier 159

Presenting All Available Options 160

Reinstating the loan 162

Negotiating with the lenders for a forbearance 162

Refinancing the mortgage 162

Listing the property 163

Selling short 164

Accepting your cash offer 164

Refinancing through you 164

Selling the home and leasing it with an option to buy it back later 165

Selling the home and leasing it without an option to buy 166

Giving a deed in lieu of foreclosure 166

Filing for bankruptcy 167

Waiting (and saving) during redemption 167

Doing nothing 168

Getting Inside to Take a Look Around 168

Contacting the Lenders 169

Contacting the senior lienholder 170

Contacting the junior lienholders 171

Chapter 10: Analyzing the Deal and Presenting Your Offer 173

Completing the Deal Analysis Worksheet 174

Calculating the homeowners’ equity in the property 174

Calculating your top cash offer 177

Logging the loan status 178

Determining options based on LTV 178

Assessing the homeowners’ credit health 179

Gauging the homeowners’ wants 180

Determining the homeowners’ gross monthly income 180

Assessing the Homeowners’ Options 181

Presenting Your Offer: The Purchase Agreement 183

Closing Time 185

Part 4: Finding and Buying Foreclosure and Bankruptcy Properties 187

Chapter 11: Bidding for Properties at a Foreclosure Sale 189

Tracking Down Auction Dates, Times, and Places 190

Preparing Your Maximum Bid 191

Guesstimating the property’s improved value 192

Estimating repair and renovation costs 192

Figuring in holding costs 192

Subtracting agent commissions and closing costs 193

Arriving at your maximum bid amount 194

Bidding at a Foreclosure Auction 197

Packing for an auction 198

Sitting in on a few auctions 198

Crafting a winning bidding strategy 199

Submitting sealed bids 199

Playing the Role of Backup Buyer 201

Following Up After the Auction 202

Chapter 12: Buying Repos: Bank Foreclosures and REO Properties 207

Acknowledging the Drawbacks of REO Opportunities 208

Getting Up to Speed on the REO Process 209

Shaking the Bushes for REO Properties 210

Positioning yourself as an attractive investor 210

Connecting with REO brokers 211

Getting connected with REO A-listers 211

Tracking the property through the REO stage 214

Working your way to the better deals 215

Following up with homeowners during redemption 216

Inspecting the Property 216

Timing Your Offer for Optimum Results 217

Acting quickly after the auction 217

Timing your move with the redemption period 218

Tuning in to the lender’s fiscal calendar 218

Waiting for the broker to list the house 219

Pitching an Attractive Offer 220

Sizing up the lender’s needs 220

Reevaluating your needs 221

Putting your offer in writing 222

Closing on the deal 224

Chapter 13: Finding and Buying Government Repos 225

Bargain Hunting for HUD Homes 227

Weighing the pros and cons of HUD homes 227

Hooking up with a HUD-approved agent 228

Finding HUD homes online 229

Finding and Buying VA Repos 230

Profiting from Fannie Mae and Freddie Mac Properties 231

Tapping into Freddie Mac’s home clearinghouse 232

Shopping for Fannie Mae properties 233

Buying FDIC properties 234

Finding and Buying Government-Seized Properties 234

Buying properties at tax sales 235

Avoiding the tax lien sales gurus 236

Buying properties from the IRS 236

Contacting your county treasurer’s office 237

Taking a trip to the state department of transportation 237

Finding government-seized property online 238

Chapter 14: Banking on Bankruptcies 241

Brushing Up on Bankruptcy Laws 242

Selling assets through Chapter 7 bankruptcy 242

Restructuring debt through Chapter 13 bankruptcy 243

Knowing When to Purchase 244

Tracking Down Houses in Bankruptcy 245

Skimming publications for bankruptcy notices 246

Researching bankruptcy filings 246

Networking with the gatekeepers 247

Dealing with the Gatekeepers 248

Cooperating with bankruptcy trustees 249

Teaming up with bankruptcy attorneys 249

Getting the homeowners on your side 250

Getting the creditors on your side 250

Dealing with Bankruptcy Delays on a House You Bought 251

Chapter 15: Sampling Some Other Foreclosure Strategies 255

Negotiating Short Sales 256

Knowing the lienholder pecking order 256

Wheeling and dealing with lienholders 259

Recognizing a short-sale opportunity 260

Teaming up with the homeowners 261

Gathering payoff amounts 262

Crunching the numbers 263

Negotiating with the lienholders 265

Buying and Selling Junior Liens 269

Buying junior liens to foreclose for a quick payday 269

Buying seconds to protect the first mortgage 271

Selling a junior lien for a profit 272

Profiting from Property Tax Sales 272

Tracking down property tax sales 273

Finding golden tax sale opportunities 274

Buying tax deeds and tax certificates 275

Getting redeemed out of your position 275

Profiting from the tax lien or deed 276

Part 5: Cashing Out Your Profit After the Sale 277

Chapter 16: Assisting the Previous Homeowners Out the Door 279

Tying Up the Loose Ends after the Purchase 280

Closing on a pre-auction purchase 280

Tying up the loose ends after the auction 282

Protecting Your Investment through Redemption 282

Maintaining the property’s status quo 282

Securing the property 283

Keeping hungry investors at bay 284

Planning Repairs and Renovations 287

Evicting the Residents When Time Runs Out 287

Chapter 17: Repairing and Renovating Your Investment Property 291

Choosing a Renovation Strategy 292

Planning Repairs and Renovations 293

Calculating the return on your investment 293

Roughing out your budget and schedule 294

Giving Your Property a Quick Makeover 297

Freshen the exterior 297

Gussy up the interior 298

Tidy up the kitchen 298

Scour the bathrooms 299

Spiff up the bedrooms 299

Make the basement tolerable 300

Attend to the mechanicals 300

Investing in High-Profile Rooms: Kitchens and Baths 301

Cooking up a remodeled kitchen 301

Updating the bathrooms 303

Adding Valuable Features 303

Chapter 18: Cashing Out: Selling or Leasing Your Property 305

Selling Through a Qualified Real Estate Agent 306

Selling faster for a higher price 306

Choosing a top-notch seller’s agent 308

Staging Your House for a Successful Showing 309

Jazzing up the front entrance 309

Decluttering the joint 310

Adding a few tasteful furnishings 310

Appealing to the senses 311

Generating Interest Through Savvy Marketing 312

Negotiating Offers and Counteroffers 313

Comparing offers 313

Mastering the art of counteroffers 315

Closing the Deal 316

Becoming a Landlord 317

Chapter 19: Checking Out Other Cash-Out Strategies 319

Refinancing to Cash Out the Equity 320

Reselling the Property to the Previous Owners or Their Family 320

Reselling to the previous owners 321

Financing the buyback through insurance-policy proceeds and other means 323

Leasing the Property to the Foreclosed-on Homeowners 324

Offering a Lease-Option Agreement 325

Assigning Your Position to a Junior Lienholder 327

Part 6: The Part of Tens 329

Chapter 20: Ten Common Beginner Blunders 331

Having Insufficient Funds on Hand 331

Overestimating a Property’s Value 332

Underestimating Your Holding Costs 333

Overbidding in the Heat of Battle 333

Failing to Investigate the Title 333

Failing to Inspect the Property with Your Own Eyes 334

Bidding on a Second Mortgage or Junior Lien 335

Renovating a Property before You Own It 335

Trusting What the Homeowners Tell You 336

Getting Greedy 336

Chapter 21: Ten Ways to Maximize Future Leads by Acting with Integrity 337

Stopping the Bleeding: Providing Basic Financial Advice 338

Assisting Homeowners in Their Job Search 338

Suggesting That the Homeowners Seek Help from Family and Friends 338

Encouraging the Homeowners to Contact Their Lenders and Soon 339

Suggesting Short Sales and Other Debt Negotiations 340

Assisting Homeowners in Assessing Their Refinance Options 340

Suggesting the Option of Selling the House before Foreclosure 341

Bringing Up the Bankruptcy Option 341

Offering a Helping Hand 342

Revealing the Option to Walk Away 343

Chapter 22: Ten Tips for Avoiding Common Foreclosure Minefields 345

Steer Clear of Foreclosure Investment Scams 346

Research the Title Yourself 346

Inspect the Property with Your Own Eyes 346

Know What You’re Bidding On 347

Set Realistic Goals 347

Muffle Your Emotions 348

Invest with Integrity 348

Anticipate Delays 349

Foresee Unforeseen Expenses 350

Deal with the Blame and Guilt 351

Appendix: Foreclosure Rules and Regulations For The 50 States 353

Index 367

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