Hey Everyone,
Just a couple of things I've been reading (mainly for American Real Estate) just wondering people's thoughts on looking at Foreclosure deals, where to find them, if they're worth a look etc.
Pretty new to investing, my father started me young but as a result of being young and knowing everything I went more backwards than forwards. I'm interested in getting back into the game. Been doing a lot of reading and researching, just trying to think outside the box a little.
Thanks Hayley
Dear Hayley,
My personal opinion :
At this moment the foreclosures are being bought up by the last few people with cash money. The price they are paying on auctions is way too high, the risks are too high too. Remember that when you buy a foreclosure ( at an auction ) you have to :
– Pay cash
– Sometimes will not have the possibility to inspect the house
– Risk buying a double-mortgager : You will auction off the first mortgage, then you find out that in order to GET the property you need to pay off a SECOND mortgage. This can be especially painful.plus a lot of more risks.
That being said, there's not enough foreclosures yet to make foreclosures interesting for the cash-buyer. Too many people think they're making good deals, buying with feeling instead of head. I'd wait a bit.What you can do is you can ask some local banks ( local ones, not the big 4 ) and tell them you're looking to buy a foreclosure. Banks usually use a RE agent or a Auctioneer to sell the houses, but some newly foreclosed houses might not have been processed yet. If the bank has a buyer 'ready to buy' , that will help them out and they might give you a discount on the house , since they won't have to pay for maintenance, cleaning up , trash-away jobs, sometimes a whole new reconstruction of the partially demolished house etc…
As a last tip : Remember that people who are being foreclosed are by definition people without money. They have thus not done ANY maintenance to their house for the last 2 years at least. Usually the people being foreclosed are unreliable and irresponsible. You can thus expect the house to be in a very , very bad shape.
All in all, you should be able to get a foreclosed house at about 30% less than the 'market value'.
The 'market value' at this moment is 30% less than the 'asking price'. So yes, ask 50% less than the asking price if you go for a foreclosed price.Like I said before, there's a few fools with cash left at the moment, they're buying up the last few foreclosures before the next HUGE foreclosure wave. There won't be many people with cash left, and then you will see the real bargains like we do now in USA. Remember that the crisis in the USA started 1.5 years earlier than the crisis in Australia. We have a long way to go ( down ).
Scamp wrote:– Risk buying a double-mortgager : You will auction off the first mortgage, then you find out that in order to GET the property you need to pay off a SECOND mortgage. This can be especially painful.As a last tip : Remember that people who are being foreclosed are by definition people without money. They have thus not done ANY maintenance to their house for the last 2 years at least. Usually the people being foreclosed are unreliable and irresponsible. You can thus expect the house to be in a very , very bad shape.
Hello Hayley,
I'm new to property but i just wanted to add my two cents regarding the above so your not scared off…I've been studying John Burley's materials who deals alot with Veterans Affairs Repos (i wish we had these in Australia!!)..
A) you can get a title search for about $12 dollars which will show you what type of liens/notes/mortgages/debts are on the title of the property… If you find a foreclosure, search its legal description (which you could get from public records i.e. council websites or RP data) for peice of mind…
who cares if the property is in complete disrepair.. I would love the opportunity to buy such a house in Sydney.. You mentioned creative investing i.e. thinking out of the box… One strategy ive studied is to control houses that are not in the state to be occupied, cut the grass, sweep the floor and sell it to a property investor who specialises in renovations and fix ups for a profit. If you can buy at 40-50 cents in the dollar because its in such bad shape, someone will buy that off you for 60-70 cents if you sell them the vision or idea. They may have the reno skill set that you dont… One investor i was listening to buys properties that were used as Crystal Meth labs, sorts them out and sells them at a 30 cent in the dollar profit.
If you look for reasons not to invest you'll find them. Scamp is the same person who said everyone who posts on this forum is 'not smart enough to do it anyway' and told everyone that if they want to be investors they should invest in economics study and purchase gold.One of the most valuable things ive ever heard was from Think and Grow Rich and it says ''Opinions are the cheapest commodity in the world. It is characteristic of people who have but a vaneer of knowledge to try and give the impression that they have much. "
Regards,
David
In relation to Mortgagee sales in Australia
Scamp wrote:. Remember that when you buy a foreclosure ( at an auction ) you have to :
– Pay cashMany people buy mortgagee properties at auction with pre-approved finance (yes an auction is unconditional in terms of finance clauses in the contract, but it is often done in the background utilising pre-approval) after outlaying a 10% deposit on the day of auction.
Quote:– Sometimes will not have the possibility to inspect the houseGenerally you will find real estate agents acting on behalf of the mortgagee are happy to arrange access for your building inspector prior to the auction.
Quote:– Risk buying a double-mortgager : You will auction off the first mortgage, then you find out that in order to GET the property you need to pay off a SECOND mortgage. This can be especially painful.this statement is totally incorrect, the holder of the first mortgage by law has the power to sell the property, in the event there are insufficient funds recovered to pay out a 2nd mortgage if applicable, the loss is incurred by the holder of the second mortgage, not the new purchaser.
Quote:What you can do is you can ask some local banks ( local ones, not the big 4 ) and tell them you're looking to buy a foreclosure. Banks usually use a RE agent or a Auctioneer to sell the houses, but some newly foreclosed houses might not have been processed yet. If the bank has a buyer 'ready to buy' , that will help them out and they might give you a discount on the house ,Banks have a duty of care to attempt to maximise the return on the property, and to be seen as impartial as to who buys it, that's why auction is generally used, its transparent, and generally no under the counter transactions are done
Quote:All in all, you should be able to get a foreclosed house at about 30% less than the 'market value'.
The 'market value' at this moment is 30% less than the 'asking price'. So yes, ask 50% less than the asking price if you go for a foreclosed price.I wish this was true, unfortunately in reality properties sell for as much as people are prepared to bid, and most mortgagee properties sell for no less than 15% below market price. From my observations banks would pass in a property at auction rather than sell at half asking price.
Quote:Remember that the crisis in the USA started 1.5 years earlier than the crisis in Australia. We have a long way to go ( down ).No doubt we'll continue to see an increase in mortgagee sales, but no where near the extent of whats been occurring in the U.S.
What happened in the U.S. occurred for different reasons to the pressures facing Australian borrowers.Skip
Hayley,
Go for it!!. Whether you buy a foreclosure type house or just make some silly offers to people, this year is a good time to buy.
When you find "the one" and you think it looks like a great deal, buy yourself a Residex Property explorer or postcode explorer report – this only costs about $100- and it gives information about the property and importantly actual sale prices in the immediate area. Once you KNOW what the property is worth (be conservative and allow for it being worth less in the current market than late 2007), then make a very low offer.
Get your pre approval for finance and then look for deals where the seller has to sell in a hurry. You will be in a strong position to negotiate a low price with a short finance clause (or no finance clause, or perhaps subject to bank valuation).
This is exactly what I have just done and I picked up a bargain.There is no hurry, but I believe 2008 will be prove to be a great time to buy.
Good Luck. If you buy 10% or more below the current market price (which is say 10% lower than late 2007) then personally I don't think you can go too far wrong. Pick a resonable area that you are farmiliar with.
Thanks everyone,
Certainly opened my eyes a little. Raised a couple of points I hadn't though of and some I had but not in enough depth. I think at this stage I'll just keep trying to learn as much as possible and hunt for the more simple deals to begin with. I can broaden my horizons once I'm more confident.
Thanks again
princesshayley wrote:Thanks everyone,Certainly opened my eyes a little. Raised a couple of points I hadn't though of and some I had but not in enough depth. I think at this stage I'll just keep trying to learn as much as possible and hunt for the more simple deals to begin with. I can broaden my horizons once I'm more confident.
Thanks again
Yes especially Skips post……
Hayley
The infomation given to you by Skip is well worth taking. I attend these actions and hunt them out during the week to get a bargan ( most of the time its a waist of time). Most banks wont give you any info about a property and will refure you to the agent. They have a legal obligation to show they have tryed to get the best price, not offen can you do an over the phone deal, beleive me Ive tryed.
Good luck mate…
who cares if the property is in complete disrepair.. I would love the opportunity to buy such a house in Sydney.. You mentioned creative investing i.e. thinking out of the box… One strategy ive studied is to control houses that are not in the state to be occupied, cut the grass, sweep the floor and sell it to a property investor who specialises in renovations and fix ups for a profit. If you can buy at 40-50 cents in the dollar because its in such bad shape, someone will buy that off you for 60-70 cents if you sell them the vision or idea. They may have the reno skill set that you dont… One investor i was listening to buys properties that were used as Crystal Meth labs, sorts them out and sells them at a 30 cent in the dollar profit.
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