There is perhaps no other business affected more by trends than real estate investing. It was just five years ago that many homeowners were introduced to short sales, foreclosures and real estate owned properties. In that time, we saw these types of transactions skyrocket in both volume and popularity. Over the past few years, as the economy has slowly recovered and homeowners found ways to lower their payments, these types of transactions have been on the decline. While the number of foreclosures is lower, there are still plenty of good deals to be had. However, this opportunity may not be around forever. While it is here, you should look to take advantage of it.
One can make the argument that this is the best time to look for foreclosures. The discounts may not be as deep as they were a few years ago, but the competition is much lower. There are many investors who feel they have already missed the boat and are moving towards other types of real estate investments. The reality is that there are still thousands of new foreclosures every month and in those deals there is more than enough room to make a profit. The key is to find the right property, in the right location and at the right price. To do this you need a realtor that has relationships with lenders and knows how to submit your offers to get them accepted.
Taking advantage of these opportunities starts with your realtor. If they have been in business for a while, they should have some experience in dealing with short sales and foreclosures. Most real estate transactions over the past few years have been by distressed homeowners or banks themselves. A local realtor may not advertise that they have short sale or real estate owned listings. You need to go out and find them. This means spending time reaching out to local realtor contacts letting them know that you are a cash investor looking for distressed properties and are willing to close as quickly as possible. An email campaign or physically stopping by various offices can put you at the top of many realtors’ lists. All it usually takes is a deal or two to begin a relationship and put you on the top of their lists.
If you are presented with a deal, you need to be ready to act. In most cases, time is of the essence. This means having funds lined up and ready to close within a week or two. You can certainly have an inspection done on the property, but if you start asking for financial concessions, your offer will quickly be dismissed. Most of these deals are as is and will be sold without work done by the seller. Knowing this, you should present your offer free of any contingencies except for the inspection and be ready to close in a short amount of time. Lenders will choose one offer over the next because it is clean and has everything updated and they are confident that you will offer the path of least resistance.
If your local realtors don’t have access or have existing relationships with investors, you can purse foreclosure deals on your own. This can mean developing a marketing campaign to distressed sellers from data that you compile through direct mailing lists, lis pendis announcements in town hall or by simply driving through a particular area. These methods take a good amount of time and money but the reward can make it worth your troubles. Instead of dealing with a realtor you are shifting gears and working with homeowners and possibly their lenders. This requires a different approach and a different type of personality. It is important to note that even though a homeowner may be late and staring at foreclosure they don’t have to sell to you. While looking for alternatives with their lender, they can also put their house on the market to try to extend their time in the house. They can also file for bankruptcy in a last ditch effort to save the house. The bottom line is that the seller always has other options and doesn’t have to sell to you, even if it looks like they should.
Even if your local investing market has reduced their number of foreclosures, it may make sense to look at foreclosures out of your area. If the opportunity makes sense, it shouldn’t matter if the deal is 10 miles away or 10 states over. There will be much more work involved in an out of area purchase, but if the short sale offers a deep discount this can still be very profitable. Nationally, foreclosures are down quite a bit in the last year, but that number is a bit misleading in that the number was dramatically higher and was due to see a reduction. There are still plenty of good deals if you are willing to find them.
The height of distressed sales is over, but the economy is still ripe for new foreclosed homes to come on the market every month. If you can find a good realtor, support your offers with pictures and estimates and know how to talk to homeowners there are plenty of deals out there.