It is easy to find government foreclosures in depressed real estate markets, but it’s also not very hard to find them in strong markets. This can be due to the owners going through divorce, career changes, or other unexpected events.
However, buyers will likely find a greater number of foreclosures in real estate markets that are in decline, or when the economy goes into a downturn. When the market is in a downturn, foreclosed houses are more available.
But there are secrets to find government foreclosures to flip for profit.
How Homes End up as Government Foreclosures
Many pre-foreclosure homes were offered as short sales but end up as foreclosures when the owners cannot pay the mortgage anymore. These properties are eventually deeded to the banks when buyers do not purchase them. The reasons why purchasers and investors may refuse to buy a short sale home could be any of the following:
- The home’s assets have been taken by the owners and/or the property has been vandalized.
- The bank will not accept an offer from buyers less than the present mortgage balance.
- Buyers do not want the hassle of such a property and have passed on it.
- The home is in an undesirable neighborhood or area.
- The listing was overpriced compared to its mortgaged amount.
- The seller did not qualify for a short sale.
Finding and Buying Foreclosures
There are several ways to find foreclosures:
Real Estate Agents
Some agents specialize only in listing foreclosures and they can do very well for themselves. You can find them by entering the search values in the Multiple Listing Service (MLS) and bring up all their sales. You can ask a real estate agent to search for REOs (real estate owned by lenders) which will show an agent’s name several times if they have many listings. This means the buyer now has easy access to these types of real estate agents.
Real Estate Signs
A buyer can drive through distressed neighborhoods and simply read the signs posted next to homes that are foreclosing. The signs might read:
- Bank Repo
Find the number and call the agent whose name is on the sign and inquire further. This is a great way get ahead of other buyers because the agents sometimes have to wait weeks while the bank approves their list price. These agents can also give information about any upcoming foreclosures not yet listed. Also, a buyers’ agent can speak to other agents who specialize in foreclosures and can obtain this information from them.
Many banks maintain online lists of foreclosed properties. However, some banks will not sell to individual buyers. Large lenders usually discard of REOs (Real Estate Owned) by bundling them into packages and selling them at discounts to investors.
Bank-owned properties are listed on many major banking websites including:
- Bank of America
- U.S. Bank
- Wells Fargo
- Asset Management Companies
Asset management companies sometimes handle foreclosures on these lender’s behalf. Wells Fargo uses Premiere Asset Services. Also, Keystone Asset Management is a national agency that deals with defaults.
When you find government foreclosures, some government agencies require the buyer to keep the services of a real estate broker to make an offer to purchase while others will take offers without one.
Government agencies offering foreclosed homes include:
- HUD: U.S. Department of Housing and Urban Development’s foreclosure homes
- Fannie Mae: Foreclosure homes through its HomePath website
- Department of the Treasury: Homes seized by the Internal Revenue Service
- SBA: The Small Business Association list of foreclosure sites and guidance
Auction companies sell many homes, sometimes selling as many as 100 or more in a single day. Although the auction frenzy can cause higher prices at auction houses, sometimes a great deal can be found in their inventory.
Web-based Foreclosure Companies
These companies may charge a fee for providing a list of foreclosure properties to buyers. This is due to the time, trouble and expertise it takes to locate and assemble precise national foreclosure lists. It is up to the buyer to decide if they want to go this route, although it might be worth it to pay these fees.
Going to the courthouse steps and bidding for a foreclosure is an option for real estate buyers. However, real estate professionals are the the usual types taking part at these, so a new investor may feel out of place and not be alert to what is exactly going on. Another downside to these types of auctions is buyers are often required to pay cash and buy the property sight unseen, and could be assuming liens or judgments and be forced to pay delinquent property taxes.
There are drawbacks to buying foreclosures. Some foreclosures can turn into unexpected nightmares for buyers while some are rough gems waiting to be polished. There are other aspects to foreclosure flipping that investors must know to complete the process profitably. Buyers should consider furthering their real estate education and getting the assistance of a licensed real estate agent or broker before they proceed.
Keep reading to learn the 3 Things You MUST Know to Avoid Losing Money in a Foreclosure Auction in this article >
To see actual government foreclosure listings, check out hud.gov, at https://www.hud.gov/topics/homes_for_sale