Loan for foreclosed property

Repo\foreclosed rentals Posted by: Ray F Mar 7 2004, 10:49 PM

I am looking for rental property for income and to live in for a few years while my wife is getting done with school . I want to save for more propertys . I am wanting to get as much house for my money and have thought of looking at repoed \ foreclosed propertys but I don’t know what kind of loan I can get , I know any more then 4 units I can’t get a normal home loan . but is there any differnces when dealing with reproed propertys . I also would like to know where I can find foreclosed propertys .
I don’t have a lot to put down and am looking to spend 75,000 on a move in ready home but am more then willing on getting something that needs work if a home is aprised for say 50000 and the asking price 30000 how much do you think I could get saying the property has rental income . As you can tell I don’t know much and could use as much help as you can give
Thank you

Posted by: loanuniverse Mar 8 2004, 10:11 AMRay:

Buying foreclosed properties is not as easy as some people make it our to be. While it is possible to get good deals, there are a few items that are left out from the whole process. The following are some of them that I can tell you off the top of my head, that I think are important to cover in order to be successful. “Remember that my involvement with foreclosures has only been marginal, and that the way things are handled vary from state to state and even from county to county”

Is the title really clean? Do you have the expertise to review the title and foreclosure papers? In a well done foreclosure brought in by a lender holding a first mortgage, all of the junior/inferior liens will be wiped out by a judgment. However, the possibility exists that one of the junior lien holders was not notified in a timely manner. This would mean that you as a third party will get a property that is still encumbered. People who do this for a living are either real estate attorneys or are able to conduct “title searches” and review the foreclosure documents to make sure that all of the lien holders were notified. By the way, government taxes are inferior to no one so make sure that you check for those.

Financing is not done the way that you think: I am only vaguely familiar with how foreclosure auctions are done in my county, but here they require a 10% down payment in the form of a cashiers check at the moment of bidding, and you need to come back the same day with the rest. People who do this, already have the money in their checking accounts so that they can request a cashiers check to be drawn using those funds. Other places might give you more time, but I don’t think any gives you more than a couple of days. You will not be able to get financing in a couple of days. After you get title, you might be able to refinance it, but that is another story.

This means that if you want to get financing for the purchase you need the financing already in place and the lender is going to want to be secured as far as repayment and as far as collateral is concerned before he funds.

Other expenses might be lurking there might be other expenses involved in cleaning the title.

The area of buying foreclosed properties is extensive and I have not really had too much exposure to it. The last time I had to do anything with them was 8 years ago when I helped manage a commercial portfolio for a former employer. If you have the time, go to a couple of auctions in your area to see how everything works. Get copies of the filings to see how they look like and what they are supposed to cover. Once you feel comfortable that you know the system well, get the financing settled before hand and make sure that you can come up with the money within the allotted time.

Personally, I think it is too complicated for anyone but a real estate attorney or someone with access to one to do successfully.

Hope this helps

Author: Commercial Loan Underwriter