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Cashing
out of Preforeclosures - Exit Strategies for Maximum
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by:
Richard Odessey
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One
of the quickest ways to real estate profits is
through preforeclosures. What is a preforeclosure, exactly? A
preforeclosure takes place from the time the bank gives notice of
default to the time the house sells at auction. Typically, this is
around the time of 90 days into default, depending on state law.
The
key to preforeclosure investing is equity - the difference between what
a house will sell for and what is owed on the house. Preforeclosures
allow you to buy a house for less than fair market value, creating
immediate equity for yourself.
Preforeclosures are your
opportunity to buy low and sell high, maximizing your profit quickly.
How can you cash in on preforeclosures and exit with the maximum
profit?
Here's how to do it.
Step 1. Find and Secure the Preforeclosure
You
must submit a written contract directly to the owners in order to buy a
preforeclosure, since the property still belongs to them during this
stage. Ads in newspapers and subscriptions to preforeclosure listings
will help you locate the properties. (See more about this in article
1.) Once you've located a property, you'll need to do the following to
screen them and prequalify your homeowners:
·Find out all you
can about the physical and financial details of the property. (Are
there liens? Loan balances? Major repairs needed?)
·Gather
correspondence from the lender(s) that will fill in the details the
owners may not be fully aware of or may not full understand.
·Meet
with the homeowner at their property and have them sign the documents
that place you complete control of the house.* Make sure that you know
who ALL the owners are, and that are serious about selling before you
start negotiating a deal.
* Note: Do this quickly once you have
decided you are interested in the property as a solid real estate
investment. This will help you turn around your equity quickly!
Once
you establish that you are there to help the homeowners, you can make a
reasonable offer that will that will help you achieve the profit you're
looking for.
Step 2: Begin Your Pre-Sale Marketing
One
of the most important steps in securing your preforeclosure is to begin
marketing as soon as you have your paperwork in order. It's time to
cash in on your equity.
Here's how to get started:
Stake your claim - literally.
You're
going to need a heavy supply of signs. Once your paperwork is in order,
take a picture of the front of the property. You'll want to keep some
“For Sale by Owner” signs in the back of your car and have them ready
once you have finished your meeting with the owner. You may want to put
out a “Rent to Own,” sign as well. Play real estate agent - put signs
around the neighborhood with arrows leading to the property for sale.
Place your ads -- begin prospecting.
Place
ads similar to the signs in local newspapers. Expect a good influx of
phone calls. When the phone rings, find out if the prospective buyer is
an investor or a prospective occupant. Collect the caller's email
address, phone number, and fax number.
You'll begin your own
list of investors this way, and you can notify them of properties
you're selling in the future as well. Real estate agents will also call
in based on your newspaper ads.
Step 3: Screen your buyers - and make the sale.
Be
carefully when you screen potential buyers for your preforeclosure. Let
them know that they'll need to be flexible, patient, and, of course,
financially qualified! Make certain they know the home is being sold
as-is condition. Once the paperwork has been approved, they'll have to
close quickly, usually within 30 days.
If you haven't received an offer that meets your standards, it's time
to move forward with the auction.
Many
preforeclosures reenter the market through auctions. You can hold the
auction yourself or use a professional company to auction the property
for you. It's best when starting out to get the advice of two different
auction companies. They'll be happy to give you advice on whether the
property would be a good property to auction off or not, based on the
asking price.
The main advantage of professional auctions is
the fact that they will do all of the marketing and auction
announcements. You can let them handle the auction details, including
screening of the buyers. If you don't get the reserve price you're
seeking, you simply pay a fee to them to help cover their cost.
If
your property doesn't sell on the first try, you can retry the auction
again at a later time while you work on unloading other properties.
Just
remember to keep your prospect list growing as you advertise other
properties, and soon enough, you'll have a healthy list of prospects
vying for your investments. Once you've sold enough preforeclosures,
investors will begin to contact you based on past sales and word of
mouth. All of your hard work can help you increase your investments and
quickly cash in on your newfound wealth - equity!
About the Author
Go to www.InvestorWealth.com for these Real Estate
Profit Secrets:
* Super Success Short Sale Secrets (*Best Course)
* Deal Evaluation Tool
* Free Teleseminars on the latest and most effective real estate profit
techniques
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