Dean Graziosi

With today’s unsettling real estate market, it’s important to understand what foreclosures are and their different types. Most real estate investors find foreclosures to be a great opportunity to buy into the real estate market.

Foreclosures are defined as a legal proceeding whereby the lien holder (usually the bank that owns the mortgage) files legal action to secure a right of redemption. In layman terms, the bank seeks to remove the borrower from the property. This is done because the borrower has fallen months behind on making mortgage payments and the bank seeks to recoup its loss.

Once the process is completed, the bank is able to once again sell the property and is allowed to keep the proceeds to pay for any legal costs and for money owed on the original loan.

Because banks rarely get the actual amount remaining on the original mortgage, it is an excellent opportunity for investors because they are able to purchase a property for much less than what a regular property would sell for.

Here are some of the different types of foreclosures:

·         Foreclosure by judicial sale: The sale of the property is done through the supervision of a court. All proceeds go to satisfying the mortgage first and then to other lien holders and finally to the borrower if any proceeds are still remaining.

·         Foreclosure by power of sale: This occurs only if a power of sale clause is included in the mortgage. This process involves the sale of the property by the mortgage holder without court supervision.

·         Strict Foreclosure: This is a rare type of foreclosure but occurs is allowed in a few states including Connecticut, New Hampshire and Vermont. In a strict foreclosure, the court orders the defaulted mortgagor to pay the mortgage within a specified period of time. If the mortgagor fails to pay, the mortgage holder gains the title of the property with no obligation to sell it.

Understanding foreclosures and how they operate can help investors become stronger investors in the real estate market.

Bookmark With

No matter how many years you may have in REI, it never hurts to go over some basic tips to help veterans and newcomers stay focused on the prize.

1.          Pay attention to the market. When you’re ordering food at a restaurant that you’ve never eaten in before, you usually ask the waiter what he/she recommends. The same goes for the real estate market. Listen to the market to find the real estate investment you’re looking for.

2.         If you want something done correctly, do it yourself. When you’re researching the market, a neighborhood, prices etc. it’s best to do your own research. Other people, real estate agents, etc. might have ulterior motives for providing you with certain information. For example, an agent might only show your comparable sales that enhance the value of the property. Do your own research and you’ll have the answers and information you need.

3.         Though some REI people like to work with others…beware. Make sure you decide which role you’re going to take: either handling the money or managing the deal. Clearly lay out the responsibilities of you and your partner so there is no misunderstanding and each knows what he/she is responsible for. If you are putting the money into the venture, let your partner use the expertise he/she has to find the right property. If you’re the project manager, take full control.

4.         When it is time to negotiate a price, asking directly is the best plan of action. “What are you asking for?” The clearer the answer, the easier it is for you to decide if you’re able to give them what they want.

5.         REI is not gambling, so be safe with your investment. Granted, any investment is risky, but with real estate the odds are usually in your favor.

6.         REI is also about cash flow, so understand what the numbers mean. Understanding all the formulas will enable you to have a nice cash flow each month.

These are just some general REI guidelines and with investing in real estate, nothing is ever written in stone. Things can change, from cash flow, rent and other variables. But following these general guidelines should provide you with a positive REI experience.

Bookmark With