Beware Foreclosure Myth's
Money magazine has some tips on buying foreclosures. "Buying foreclosures once appealed mainly to the small group of hard-core real estate investors who were willing to dig into untouchable rehab projects and wrestle with deadbeat tenants. But in recent years, scores of self-help books, Web sites, gurus and classes have sprung up, touting the notion that buying property from distressed homeowners is not only the surest path to real estate wealth but also within easy reach of anyone with spare time and gumption.""Foreclosure investing has always been fraught with risks. But rather than creating more buys, the torrid market of the past five years has added a whole new level of risk by leaving fewer genuine deals available for thousands of eager new investors. 'It's a tough market today. The low-hanging fruit has already been picked,' says author Gary Eldred."
"If you've been waiting for the McMansions in your town to start going on the auction block, your wait isn't over just yet. Another brake on foreclosures is that banks are no longer playing hardball with strapped homeowners."
"'Compared with the late '80s and early '90s, lenders use velvet gloves,' says Eldred. 'They've realized that giving people a six-month moratorium on payments, stretching out the term on the loan, reducing the rate, it's still more profitable for them than going through a foreclosure.'"
"What would push more homeowners over the brink? Hard economic times have always been a catalyst, says Doug Duncan. For example, in states that have recently lost industrial jobs, such as Ohio and Michigan, foreclosures rose significantly in 2005. So if the national economy sours this year, expect a big jump in foreclosures in 2007."
"Another catalyst is overbuilding. Regions that have enjoyed a boom in new condominium development, South Florida, for example, could soon suffer a spike in foreclosures if investors are unable to rent or unload their condos for a profit."
"'Five years ago, there were the same five or seven people at every auction,' says veteran foreclosure investor Roy Cloughen of Long Island, N.Y. 'Now there are 75 to 80.' Auctions are by far the riskiest way to invest, says Rick Sharga. 'You are buying the property sight unseen, and you will be responsible for any taxes, liens or second mortgages still on the property.'"
"If you're willing to knock on doors and ask embarrassing questions, you may find deals among pre-foreclosures. You can get listings from Web sites that search court filings and other public documents for homeowners behind on their mortgage payments. You can then contact the homeowner and try to negotiate a deal. Trouble is, the listings on many of the Web sites are out of date, and a lot of people are reading the same lists. That's why Pamela Smith taps a network of realtor contacts she's developed and checks listings of borrowers in default in her county paper for leads. Notes Smith, 'You have to be aggressive.'"
posted by Ben Jones @ 9:29 AM
2 Comments:
'Compared with the late '80s and early '90s, lenders use velvet gloves,' says Eldred. 'They've realized that giving people a six-month moratorium on payments, stretching out the term on the loan, reducing the rate, it's still more profitable for them than going through a foreclosure.'
Come-on Money magazine. The reason lenders were tougher back then was because of the amount of defaults, which tokk many banks and S&L's down. Give the exotic loans enough time, and the velvet gloves will come off.
And sure, there are a lot of people at auctions. They were camping out at sales offices just a few months ago. Time is the missing ingredient here.
People were trying to get into real estate through every avenue. Auctions/foreclosures became very popular through the idea that it use to be a bargain.
This is not a good investment strategy currently and in the near future as prices lose all support.
These will become good options again years down the road.
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