Foreclosure Research - 10 Tips On How To Research Foreclosures
Every successful real estate investor has mastered one very important skill: How to research foreclosures. Every successful real estate investor knows that just because a house is in foreclosure does not mean it is a good deal to invest in.
So when it comes to researching foreclosures, how do you know what to look for? Here are ten tips:
- The total balance of all mortgages on the property must not exceed 75% of the as-is fair market value of the house. This percentage is known as the loan-to-value (LTV) ratio.
- Make sure that you are able to quickly determine the fair market value (FMV) of the properties you are researching, based on a comparative market analysis (CMA) of other homes that have recently sold in the area.
- Be able to quickly look up the status of the property tax payments on the house. Are they delinquent? If they are, then they will need to be taken into account when you calculate your profit margins on a foreclosure flip.
- It is extremely important that you be able to identify all of the subordinate liens on a property. Subordinate liens include second mortgages and judgments.
- If it is a town home or a condominium, make sure to find out what the monthly assessment fees are, as this will factor into your carrying costs for the property.
- Are the mortgagors / homeowners in bankruptcy? If they are, then you won’t be able to buy the house from them. You need to be able to look this up.
- Is the house vacant or occupied? If the house is vacant, you will need a way to locate the mortgagors / homeowners so that you can contact them.
- What are the details of the mortgages on the property? When were the mortgages taken out? What are the lengths of the mortgages and what are their interest rates? It is important to know these, because if you research a property that has a $100,000 mortgage on it with a remaining balance of $68,000 at an 8% interest rate, and the mortgage hasn’t been paid in twelve months, then you need to be able to calculate roughly what the current balance of the mortgage is thorugh the present-date. Remember that the clock keeps ticking and the monthly payments keep piling up even if you stop paying your mortgage payments.
- When was the foreclosure filed? When is the auction date? This helps you to prioritize the urgency of this particular deal.
- What is the condition of the house? Though you may not be able to see it from the inside, you should be able to get a sense of the overall condition from the outside by driving by the house and comparing it with other houses in the same neighborhood.
Research is one of the most critical and yet often the most neglected aspect of the foreclosure real estate investing process. That is why it is imperative that you have accesses to the resources of a reliable, accurate, trustworthy, and comprehensive foreclosure listing service to help facilitate you in your hunt for your next real estate deal. Check out http://www.foreclosure.com/ for more information.
Tags: flipping houses, foreclosures, real estate investing