Buying Distressed Properties

There are 3 main ways to buy distressed properties.

Foreclosures, short sales and real-estate-owned (REOs) are all distressed properties but aren’t all the same.

The three types of distressed properties do have similarities. For instance, most short sales are foreclosures, however not all foreclosures are short sales. To further complicate matters, REO’s are not short sales but some intended short sales can end up as an REO.

Here are the basics about these distressed properties:

Distressed Properties-Foreclosures:

A foreclosure is official when the notice of default has been filed in the public records. It means the owner has stopped making mortgage payments (usually behind 2 or more payments) and the lender has given notice that unless the payments are brought up to date, it will sell the property to the highest bidder.

Not all homes that fall into foreclosure go to public sale because owners have the right to make up back payments up to a point, the time which varies from state to state.

Foreclosures are typically profitable real estate deals because investors and home buyers buy the distressed properties for the amount owed, picking up the home owner's equity for free.

As an investor, before you decide to buy a home in foreclosure (in California) by making up the back payments to the lender, giving the seller a few dollars and recording a deed, call a real estate lawyer.

Distressed Properties-Short Sales:

A short sale is when the lender agrees to accept less than the amount owed on the mortgage for distressed properties. This happens after a distressed property goes into foreclosure but before the distressed property goes to public auction.
Investors can typically buy the home for even less than a foreclosure because investors are not paying off the existing mortgage or paying back payments.

Sellers don't need to be in default and it isn’t necessary for the properties to be distressed in order for a short sale to occur. For a buyer who wants to occupy the home, buying a short sale makes financial sense.

Distressed Properties-REOs - Real Estate Owned:

REO or real estate owned distressed properties are similar to short sales except the property has already been repossessed and is by the lender.

Lenders usually end up owning distressed properties if nobody bid high enough (to cover the mortgage owned on the property) when the house went to public auction.

SUCCESS SECRETS on generating motivated seller leads and real estate leads

The MOST important aspect of marketing is letting potential customers (real estate leads) know you are there. In order to buy from you, use your product or use your service, potential customers (real estate leads) need to know you exist.

Real estate investors need to communicate to the public and to motivated sellers what they do and how what they do can help those reading their information. Always keep the old acronym in mind WIIFM…what’s in it for me. When deciding on marketing materials (whether its business cards, “we buy houses for cash” signs, direct mail, or door to door flyers) and what you are going to say to attract motivated sellers, be sure to clearly state what’s in it for them.

If your business is different than your competitors tell the public how you stand out above the others. If what you do isn’t much different than your competitors, you have to find other ways to stand out from the competition.

For instance when deciding how to convert potential customers (real estate leads) into clients (closed deals) put yourself in their shoes and think about what’s important to them and where they go. Perhaps restaurant or ice cream shop coupons would make their day because they wouldn’t usually be able to afford to take their child out for a treat. Maybe coupons for a florist to surprise their significant other with, rather than having to share more bad news when they get home.

If you care about the things that are important to your potential clients (real estate leads) you WILL succeed!