The Five Steps to Buying a Foreclosed Home

Just got this in the mail -- the book Are You Dumb Enough to Be Rich?: The Amazingly Simple Way to Make Millions in Real Estate. Obviously, it's about making money at real estate -- which is a topic I'm usually not that excited about (seems like so many "make money in real estate" books are full of hype.) But this one looks different. I haven't gotten to start it yet, so we'll see for sure.

But today, here's a portion of the book that describes the five steps to buying a foreclosed home:

Foreclosure Step 1: Contacts make contracts.

Take a few hours in the next three days and call at least five different banking institutions or finance companies in your areas to find out who represents their foreclosed/REO property. Call every auction company in the yellow pages and ask them if they auction real estate. Google search for the foreclosures in your market with city and state specified. You should start to see several deals per month that are attractive.

Foreclosure Step 2: Establish the BST or market value.

Establish the “traditional” market value of the property through comparable sales. Get comps from agents, realtors, and brokers or become an affiliate member of the local board of realtors. Without the traditional market value of the property, you have no idea if the price you are bidding is a value or not.

Foreclosure Step 3: Have the cash ready for a quick close.

We know we are going to have cash involved if we are dealing with an institution on a foreclosed property. Start lining up your funding, speak with your investors, watch your interest rate. Don’t give the farm away on what interest rate you are willing to pay.

Foreclosure Step 4: Make the offer.

When you are dealing with the representative of an REO property, the only offer they are interested in is a contractual offer. You will have to use the state-approved “Purchase and Sales” contract. Make sure your offer is favorable for you. All offers represented by agents, realtors, or brokers must be in contractual form or they don’t exist.

Foreclosure Step 5: Create deposits.

This is a friendlier way to say “sell the property.” Think of marketing as creating deposits. Peter Drucker said: “We only get paid for two things, marketing and innovation.”

As you may know, we're in the market for a new home and a foreclosed property might be an option for us. We have a new real estate agent who's handling steps #1 and #2 for us and I'm saving up for a big down payment taking #3 off the list (that is, when I'm not moving it into the market.) We'll handle step #4 when we find the right place and there's no need for us to deal with step #5 -- we plan on living in the home.

I'll let you know if I like the book. I hope to read it over the next month or so.

Comments

[Minimum Wage]

I saw this book a year ago and the title is so dumb I still don't understand it.