Using an Agent to Buy Foreclosed Properties
Find Distressed Real Estate Investments through a Realtor
Nov 5, 2009
The easiest way to find foreclosed or defaulted properties for sale by banks is to go through a real estate agent familiar with that market. Some real estate agents specialize in foreclosure sales or short sales. These are two very different transactions. In a foreclosure sale, the bank owns the property and sales that property as-is. In a short sale, the seller owns the property, but owes the bank more than the property is currently worth. Both offer opportunities to purchase good investment properties at a discount.
Foreclosure Sales
Banks do not want to own real estate. With that in mind, banks employee a variety of people to get rid of the foreclosed properties they come into ownership of. While many of these people are employees of the bank, they also publish lists directly to realtors. In these challenging economic times every realtor will claim to be an expert in foreclosure sales, but buyers should be careful. It takes experience and patience to work with banks in a sale, so not all real estate agents are created equal. Remember, even though the buyer may not pay commission, that pay is implicitly applied to the purchase price of the property. Good investors get their money’s worth from their agent.
When considering an agent, a buyer should specifically set out their criteria and then interview them based on those criteria. When considering foreclosures, a realtor should have handled multiple transactions before, worked with investors in the past and have experience working with a variety of banks. They should also be able to recommend other good professionals to help the buyer through the transaction. It will be important to have a good understanding of the liens on the property, as well as an major issues. The buyer is purchasing the property “as-is” and will be required to pay off some liens before claim title to the property.
Short Sales
Short sales are significantly harder than simply buying foreclosed investment properties. Bank will have to record a loss on their books when they complete the short sale transaction. Because of this, banks will try their best to maximize their value. Borrowers will need to show true hardship through a myriad of documentation and the bank will have to genuinely feel like a default will be imminent if they are not able to close the sale.
Once that hurdle is reached, the buyer must be vetted. The bank will want to be sure that the sale can close. A good real estate agent must be very familiar with the paperwork required by the bank and must be very organized. Additionally, they will need to follow up with the bank often and be patient. While buyers can certainly find good deals in short sales, they will need to be patient as the process can take two to six months.
A great agent will earn their fee and then some in these highly specialized transactions. Don’t be afraid to interview multiple agents until the right one presents himself/herself. Realtors can also be great for sourcing these deals. Be patient and a good investment just might present itself.
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