Investing Power Tactics for Foreclosures, HUD Foreclosure homes, Real Estate Investing, Foreclosure Homes, Foreclosure Investing, HUD Homes, Fannie Mae Foreclosures, Government Foreclosures, Condos, Repossessed Houses, Distressed Home Owners, Single Family Homes, Rental Homes, VA Homes, Free Real Estate Articles and Creative Real Estate Investments

"Is Uncle Sam Slashing Real Estate Prices with Foreclosures?"
               Do we agree that good, old Washington D.C. manages to bungle most any large project it tackles? Even so, Uncle Sam does not give away government foreclosed homes for a meager one dollar.

               I don't know where that idea came from, but we do have people ask us where they can get a list of homes selling for a buck. Sorry folks, that is a fantasy.

               But wait! Let me tell you how you can scoop up bargain priced, foreclosure homes!

               Yes, during the darkest days of the banking failures at the end of the 1980s, the Resolution Trust had so many foreclosed homes on their hands that a few investors were able to buy them in bunches for as little as one thousand dollars each. It took courage and cash to jump on those opportunities at that time ~ courage and cash are always in short supply at the bottom of an economic cycle. As the old saying goes ....

"Fortunes Are Made When Blood Flows in the Streets."

               Also, these opportunities passed most of us by and now we are in the opposite phase of the cycle. The economy is booming, everyone is working and the real estate market is thriving, right? Well, yes and no. For those investors who are always looking for bargain properties, homes they can add to their portfolios at below market value, good times are hard times. Most single family homes can easily be sold for their full value in a reasonable amount of time.

               Some housing is in such demand that frantic buyers bid the price up far above fair market value. It is much more difficult to find distressed home owners who are forced to sell their homes quickly at a discount when the economy is booming. Yes, but ....

"There Are Always Good Deals If You Know Where To Look!"

               And yet the seasoned real estate investor knows that there are always good deals to be found if you know where to look! Don't you find it astounding that in these times of prosperity it is our friend the government that may be providing you with a chance at buying foreclosure homes at bargain prices? Get yourself comfortable and let me explain ....

"Can You Believe It? 3% Down Payments!"

               Never before has it been so easy for a low-income American to obtain a mortgage insured by the FHA (an arm of Dept. of Housing and Urban Development - HUD). FHA has reduced down payments to 3% (or less) and reduced its underwriting process from days to just minutes.

               Gee, does that sound like a prudent thing to do? Are people who buy homes under those conditions really a good risk? Does it sound a little like a "risky scheme"?

               The FHA does not lend money, it just insures the lender against loss. That means if mortgage payments are not made, the FHA has to pay off the lender and foreclose on the buyer of the home.

               The money to pay the lenders comes from a pool of mortgage insurance money that every home buyer must pay if he/she finances with a FHA insured loan. The fee for the insurance is included in the buyer's monthly payment and it must be paid every month for the life of the loan. Taxpayers would have to make up any deficit.

               FHA has been aggressive in guaranteeing mortgages because it was eager to help President Clinton fulfill a promise he made in 1992, that he would add eight million new home owners to the housing rolls by the year 2000.

"Homes for Votes?"

               It seems that to reach that goal FHA would guarantee loans to anyone breathing. It was rumored that there had been complaints to HUD from some citizens that underwriting standards were so low that unemployed college students and chronic indigents were among those getting FHA insured loans.

               Would you risk your own hard-earned cash on those loans? No way, right? Ah, but then, perhaps you don't know the cash value of a vote? Politicians from all parties sure do and they are not shy about finding ways to create legal payoffs.

Surprise! "Homeowners Defaulting at an Alarming Rate!"

               So guess what? You now have in the neighborhood of two million recent FHA loans with many of them falling onto the backs of well meaning but unqualified home buyers. Brace yourself for the next big surprise. HUD's own Inspector General's office suggests that FHA-insured loans are beginning to default at an alarming rate. I'm sure you're shocked, right? But even that "alarming rate" may be deceptively low. See, the FHA has what it calls an "early-mitigation program". This program tries to avoid the high costs of foreclosure in some cases by changing the terms of the mortgage, forgiving some of the debt, or selling the house prior to repossession.

               When FHA places a defaulted loan into the early-mitigation program, it is taken out of the default category. However, many of these homes will still go into foreclosure at a later date, so the number of troubled properties is greater than the numbers indicated!

               The Inspector General says that during one recent 21-month period, FHA's loan-default rate was up 21%. At the same time, the VA loan default rate was up just 2%.

"Bargain Hunters ~ Are You Listening?"

               Folks, HUD has a bushel of homes in foreclosure and there are plenty more in the pipeline. Attention investors!!!! There are bargain properties popping up in your area now and that will continue over the next few years. Will every HUD property be a good buy for an investor? No, but some will be very profitable deals if you buy carefully.

               Here's what you need to know to start prospecting among the homes HUD has to sell, either for an investment or a personal residence.

"Make Money With Errors!"

               Anyone can buy a HUD foreclosure home if they have the cash or can qualify for a loan. Most of the foreclosed homes have values in the low to moderate price range. The homes are usually priced at near market value. The price is established based on the price of similar homes sold in the area. But you can find bargains if you know what to look for!

               There is room for error in the way FHA prices a home and that is one way you find bargains. Some HUD jurisdictions with a mounting inventory of unsold homes may be inclined to value them below market just to move the darn things!

               The homes are sold "as-is", without warranty. That means that HUD will not pay to correct any problems. The HUD asking price for a "fixer" home will reflect the fact that the buyer will have to invest money to make improvements. This is another bureaucratic judgement call!

               You may feel the property can be upgraded for far less than the discount and that would leave room for your profit, either as a rental or for a quick sale. Pay a home inspector or building contractor to check out the home and give you a report if you are not experienced in such things.

               Depending on the condition of the property, HUD might offer special incentives such as a cash allowance to upgrade the property, money for moving expenses, or a bonus for closing the sale early. On most sales, the buyer can even request that HUD pay all or a portion of the financing and closing costs. Ask and ye shall receive ~ maybe!

"Real Estate Brokers are Eager to Help You!"

               HUD foreclosure homes can only be purchased through a HUD-certified real estate broker. An agent must submit your bid for you. It is important to work with an agent or broker who regularly represents people bidding on HUD homes. He/she will know the tricks of the trade in your area. From them, you should learn what you can and cannot expect ~ when you can negotiate and when you can't.

               Look in the yellow pages and find a broker's ad that indicates they specialize in HUD foreclosure home sales. Ask for an agent with experience gained in doing a number of HUD deals.

"Let's Go Bidding for Bargains!"

               When a HUD foreclosure home first goes on the market, it is in the "Offer Period". The ending date of this period will be indicated in the listing. You submit your bid during this time frame. At the end of the "Offer Period", all bids are opened and the highest bid gets the property. What a thrill when yours is the winning bid!

               If the home is not sold during the "Offer Period", it is moved to the "homes for sale list" and you can submit a bid any business day. If that bid is accepted by HUD, your real estate agent will be notified within 48 hours. When there are a lot of properties on the "homes for sale list", HUD may be more inclined to accept a lower offer.

               There is paperwork unique to HUD when you buy a home, but your experienced real estate agent will guide you through all of that. Normally, a sale will close within 30 to 60 days. HUD usually pays the agent a commission of up to 6% of the purchase price.

"Anyone Can Buy These Homes!"

               Most HUD foreclosure homes are initially offered on a priority basis to owner-occupant purchasers. Following the priority period, unsold properties are then available to all buyers, including investors. That means you!

               If you were looking for a home for your personal residence, the "Offer Period" would be the best time to make an offer. Most of the best homes are sold during this period; however, with the increase in foreclosures, supply is exceeding demand in some areas and good homes are ending up on the Homes For Sale List.

               If you are serious about investing in HUD foreclosure homes, you can build a relationship with a real estate agent and he/she can keep you supplied with each newly released Offer Period list and the Homes For Sale lists. Or, you can find lists of HUD homes for sale in any state on-line at hud/investrs.html.

"Just Ask for a Better Deal!"

               Remember the early-mitigation period we mentioned above? That means that sometimes FHA will make deals to keep a homeowner from defaulting. The FHA should be more willing to deal when they have a pot full of defaults on their hands ~ like now!

               Would it be possible to find a homeowner facing foreclosure, negotiate some kind of debt relief on behalf of the owner, have the property released from the default action and then purchase the home with the owner actually walking away with a little cash? Think about it. That's a win-win situation and a key to some very profitable deals!

"Fannie Mae ~ You Make My Day!"

               To illustrate even more wide-open opportunity, let's switch from HUD to Fannie Mae foreclosures. Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available all across America.

               They don't lend money directly to home buyers; they buy mortgages created by others. If you have ever dealt with a mortgage broker, for example, the loan often will be sold to Fannie Mae.

               Buying thousands of loans every year means Fannie Mae also will end up having to foreclose on some of them. This is another source of homes that may lead to some bargain buys.

               Fannie Mae-owned homes are sold through local real estate brokers just like HUD homes, but there is a difference. Fannie Mae lists their homes on the local Multiple Listing Service (MLS), while HUD homes are found exclusively on HUD lists.

"Oodles of Bargain Properties!"

               Fannie Mae generally owns a wide selection of homes, including single-family, condominiums, and town houses. Many of these homes are relatively new; however, older homes are offered in some areas.

               As with HUD, you must present your offer to the listing broker who will take it to Fannie Mae. Fannie Mae may accept your offer, reject your offer, or make a counter offer. A counter offer would begin the negotiating process.

               Your success in negotiating will depend on how large their inventory is and how quickly property is selling in the area. Experience will quickly teach you what's what!

               Since Fannie Mae homes are listed on the MLS, you can use any broker to make a computer search for homes. You can also find a list of homes for sale at the Fannie Mae Internet site at www.fanniemae.com/homes/index.html.

               Here again, it is worth the time spent to find a real estate agent that has had experience dealing with Fannie Mae. Most agents just fill out purchase agreements for ordinary home buyers and don't really understand the requirements of an investor.

Don't be afraid to push your agent into asking for a better deal, or at least asking the Fannie Mae representative if there is anything else he/she can do to help the deal go together. A real estate agent is your employee. Make sure she/he earns her/his fee!

"If You Think That's Good ...."

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"Want to Buy Apartments?"

               How about investing in foreclosed multi-family properties? Here is why it is worth considering.

               In years past, the American dream was a nice little three bedroom, two bath home in the suburbs. Now a growing number of people prefer apartment living even though they can afford to buy a house. This change in attitude may be because both partners in a marriage are career oriented and don't want the burden of maintaining a single family home.

               Another factor is freeway gridlock. They may want to rent an apartment that is closer to the workplace and avoid the daily grind of a long commute.

"Oh, Baby!"

               In addition, the Baby Boomers turning 55 are increasingly selling their homes and moving into rental apartments. And, the "Baby Boom Echo" generation is entering the job market and getting salaries good enough to rent Class A apartments. There's more ....

               Between March 1998 and March 1999, the number of apartment dwellers grew 2.2%, while there was just a 1.4% gain in total households. Many of those renters were high-income families. Are you getting the picture? More folks are looking for apartments!

               With that increase in demand, it follows that there should also be an increase in apartment construction, right? The answer should be yes, but it is not happening.

               Multi-family construction jumped 7% from 1996 to 1997. In the first quarter of 1998, construction jumped an additional 15%, but with a credit crunch later in the year and a drop in share prices blocking real estate investment trust access to equity capital, 1998 starts of 303,000 units were about even with 1997. 1999 was about the same. Climbing interest rates in 2000 continued to hold down construction.

               On the other hand, vacancies are drifting down from as high as 8% in 1993 to just 4.9% in the second quarter of 1999. Not only that but the average sales price of a Class A apartment, which ran about $55 per square foot in 1993, has vaulted to $90.

"Demand for Apartments is Increasing!"

               Look what has happened here. Construction is not keeping up with demand. New building is not increasing as fast as would be expected because many builders have left the field and others can't get capital. This can make existing multi-family property very desirable. It is a perfect time to own apartment units, large and small!

               Since Fannie Mae promotes multi-family lending, they have apartment foreclosures. In their inventory, you will find properties from five units up. Check in at www.fanniemae.com/homes/index.html. You can search by state, zip code and type of property.

"Free Real Estate?"

               As long as we are talking about finding bargain property, how about FREE real estate? I mentioned this above and YES, there really is such a thing. The secret is a little understood law that was created to keep all types of real estate from falling into disuse. This property is free to anyone who understands how to find and claim it.

Click here if you would like to learn more about FREE real estate.

"Do You Have All The Tools?"

               The more methods you understand for finding and buying bargain properties, the sooner you will reach your financial goals. Owners in distress and properties facing foreclosure should be among your prime targets.

Click here to learn about our pre-foreclose, profit system.

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