Pre-foreclosure investment idea

Board Topic: Investment Idea
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Investment Idea

Posted by: invest_shaboi Dec 5 2004, 04:06 PM
[SIZE=Hello everyone. I want to invest in pre-forclosures. I believe that is can be a very low cost way to get involved with real estate. I think this is such a great idea because of the financial hard times of our nation and a lot of people are losing their homes. My understanding from the reaserch that I have done is that I can find a person who is in default with their morgage meet with them and negociate a contract that allows me to purchase the property for myself as well as sell the contract of purchase to an investor for a profit.. I undersand that by simply giving the homeowner $10 on the contract that it will be valid. The benifit for the homeowner is they save their credit rating and the hassel of being evicted and having a very difficult time buying again. The benifit to me is the equity that is in the property. I also understand that I can contact the lender and negciate and additional discount on the exsisting loan of the homeowner. also called a (short-sale). I was told that this is handled by the loss mitigation department of the lending institution.

I would like to know if this is realistic? Should I do this business under a business name. and how should I form this company Incororate -sole proprietor etc.
Do you think that investors will be knocking down my door for these properties with 15-30% equity.

Posted by: loanuniverse Dec 6 2004, 02:13 PM
There are people who do this as a business, but my personal opinion {and this is just an opinion because I never sat down with anyone to discuss their business plan} is that this is not that realistic. I base my argument on the following:

1- Most times the person in the process of being foreclosed will not even discuss selling. After all, you are calling on them out of the blue.
2- If they are thinking of selling, they would use a realtor or maybe they are already using one and have not found a buyer.
3- I doubt very much that you will get anything at 30% under “market value”.
4- The amount of equity on foreclosed property is normally lower than 30%.
5- If there is anything that a buyer can provide in this situation is expediency. This means having the money ready to buy the property in cash. There is no time to get underwritten for a new loan in most cases.
6- If you get into a contract, you will most likely have to follow through.
7- I do not expect anyone to give you a purchase contract without a significant “good faith / escrow” deposit. The $10 would be legal, but who would enter into a contract where the buyer gives ten bucks?

That is it for now

Posted by: Commercial Lender Dec 7 2004, 04:50 PM
I agree with admin. Its not that easy to find people who are between lunch and forbearance. I guess the whole thing is subjective but from what i have heard 'flipping' of properties is tab more profitable.

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