10 Tips for Investing in Distressed or Foreclosed
Properties
by Elaine VonCannon
1. Search on the world wide web for distressed or foreclosed
properties as a starting point. Use a professional REALTOR to identify great
foreclosure deals for you. You may be successful at searching the web on your
own, but keep in mind some of the information is outdated, some may be
incorrect, and some of the available properties are not even listed. A REALTOR
subscribes to updated MLS listings and can offer you the most current
information available.
2. If you search yourself for distressed properties and
purchase from the selling agent, you are paying a commission to someone with a
vested interest. Obtain objectivity in the sale by working with your own
REALTOR. You won't pay any more. Technically, everyone works for the seller,
since they pay the commission. 
3. With distressed or foreclosed properties, time is of the
essence. Purchasers must close on the date specified by the agency, and cannot
close after this without penalties of $25-200 per day.
4. It takes 1-3
weeks to qualify a loan. If you are approved for a loan, make sure you are
qualified by your lender as soon as possible. If you are paying by cash, make
certain funds are available. If finances are in order, the REALTOR will then
submit an offer. When the offer is accepted by both seller and buyer, the
REALTOR will submit the ratified contract to the lender and closing agent.
These steps will begin the process of a successful real estate transaction.
5. When purchasing a distressed property, always obtain 3-4 bids from
different contractors to estimate costs of repairs, if you do not plan on doing
the work yourself.
6. If you are going to sell the property after
rehabilitating it, ask your REALTOR to research similar properties in the
neighborhood to ascertain market price.
7. Keep copious records for tax
deductions. Any expenses related to the purchase, repair, or maintenance of the
property may qualify. Meticulous records are key to a profitable real estate
venture.
8. The title you receive after purchasing a distressed or
foreclosed property is a special warranty deed rather than a general warranty
deed. Some buyers are alarmed by this, but there is no need to worry. The
purchase of title insurance protects the buyer. Each lender purchases insurance
to protect the loan as well. Titling insurance should be obtained by the
property purchaser. It is always offered by the closing agent. Consider using
an attorney instead of a titling company as your closing agent. An attorney is
only $50-75 more than a titling company. A real estate attorney can remedy any
situation that may arise. Therefore, they are more efficient representatives on
time sensitive foreclosure properties.
9. Foreclosure properties require
special addendums and special contracts by the individual bank and HUD office
(where applicable).
10. Foreclosure properties are potentially the most
profitable, but require the most attention to detail. A REALTOR experienced in
foreclosure deals is highly desirable because the paperwork must be in order to
submit a proper bid, and timeliness is critical.
Elaine VonCannon is a REALTOR with RE/Max Capital in
Williamsburg, Virginia, and she manages investment property as part of her
business. Her husband Joe is a contractor who collaborates with her on
rehabilitation of properties. She has helped numerous clients invest in and
make money on property investments in Southeastern Virginia.
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