How do I find a foreclosure?

Finding a foreclosure property requires a combination of diligence and patience. Each MLS system has its own set of criteria to be filled out by the listing agent. My best advice is to call one of the larger real estate companies and ask which agent in the office works mostly with REO’s, foreclosures, and investors. You can then contact that agent and ask to be put on an email list of their foreclosures as they come in.

That works really well for getting the addresses, but many of the agents who list a lot of foreclosures don’t have time to work with buyers. Handling foreclosure properties for a bank requires a lot of paperwork and caretaking. They may have a few steady investors that they work with, but for the most part you’ll need to find a buyers agent.

Finding a buyers agent is a little harder. Many REALTORS say they work with investors, but don’t really understand the foreclosure market. Bank owned properties are a different breed, and buying a bank owned property is not for the faint hearted!

A good investor agent will not have time to show you the 25 properties you need to see to find the “diamond in the rough”. It will be up to you to drive by the addresses and decide if you want to go inside. Then call your REALTOR to meet you. Ask them if you buy lunch if they will discuss your goals and how best to meet them, and how you can most efficiently find the properties you are searching for. Ask them for advice on locations and strategies, as well. If they don’t “get” what you are trying to do, try again until you find the right agent to help you meet your goals. Then, treat them like the team member they are!

If you drag your REALTOR out to see 15 houses and never make an accepted offer, you will find that they no longer answer your calls. They have 10 other investors who do screen the houses and respect their time. A good investor agent is money in the bank for you, never take them for granted!

Banks do not follow the normal rules and practices of the local MLS board. They almost alway have an “addendum” which is essentially a re-written contract that puts them in control of the sale. They are sold “as is”, there are no disclosures, and there is no recourse after the sale. They set the good faith deposit, and after a certain number of days it becomes non refundable for any reason. They also set the closing date and place, and any delays will cost a “per diem” or daily surcharge. You must provide a proof of funds or financing letter with any offer to be considered. VA foreclosures here in Louisville, Kentucky actually add on a “service fee” (the last one I sold added $800 in costs to the buyer), and when we tried to contest the fee because it was not disclosed until after the withdrawal deadline, the seller was told he would forfeit the deposit if he didn’t close. The deposit was $1500. He closed the deal, but hasn’t bought another VA foreclosure.

It is up to the buyer to perform “due diligence”, and it is often best to do most of this prior to making an offer. Unfortunately, the seasoned investor will walk through a “hot” property and determine the condition quickly. They may even take their contractor through to give a rough estimate. This enables them to write an “as is” offer with a quick closing, and may shut the novice investor out of the best deals. This is why having a good investor agent is so helpful, they can steer you clear of some bad deals, check on sewer connections and flood plains, and help with neighborhood price ranges so you can make a quicker and more informed decision.

In this market their are plenty of deals to go around. You just need to have your financing ready, and be willing to move quickly. Getting caught up in the “Paralysis of Analysis” has lost many a deal!