Case Study: Preforeclosure Search
By Wade
Ogletree
Yesterday morning, I went to the "Southern Investor"
foreclosure section and
pulled up the public notice links for my particular state. I had an
investor who is ready to buy, and I needed a hot new deal.
From the public notices for the county of my choice, I copied and printed the
foreclosure notices, and then went through highlighting the addresses.
Sometimes both the legal and street addresses are given. Sometimes, just
the legal address.
The first step was to see if the houses were listed with a Realtor.
Higher end homes are rare to find in foreclosure because when the owners get in
trouble, they sell. One particular home I found was for sale with a
Realtor at market price. During the time of their listing, the home had
come down no more than other homes. There was nothing to indicate that the
owner's were in trouble. Fortunately for them, they had found a buyer and
the home was pending. Ironically, the contract on the home was signed the
same day the foreclosure auction was announced in the paper.
For some homeowners, lack of equity keeps them from selling, but unless the
investor is ready to negotiate a short sale, that won't do him any good.
Investors need a house that's heading to the auction block with enough equity to
make a purchase profitable. I identified houses that were not listed by a
Realtor and checked out the market prices in each neighborhood as I went.
2004 and 2005 were hot real estate markets, but nothing happened in 2006.
This was attested to in the numbers. Homes bought in 2005 had seen no
increase in equity. Some of the homes were bought new from a builder who's
big marketing ploy was getting consumers in a house for $1,000 down. No
value growth. Missed payments. Nothing down. No room for an
investor.
Then I found what I was looking for. The home was bought new in
2004. Homes in the neighborhood were now selling in the 140's.
Through my MLS history search I found that the owners had paid closer to
100. Depending our the tools you have access to, doing a history search
may or may not be an option, but it's a step that can be skipped anyway.
The next thing I did was to check out the public records. From that I knew
who owned the property. I then went to the county recorder's website and
armed only with a name I learned that the house was mortgaged for a little over
$91,000. This, I knew, was a winner. With a good $50,000 in equity
there was room for negotiation, for repairs, and for a quick under-market sell
to reduce the investor's exposure. With all of that, I
estimated my investor could walk away with $25,000 to $30,000.
End of story? Not quite. There is deeper research to be
done. Are there liens on the property? Is the title clouded?
Those concerns are always present. This particular house has its own
challenges. The house has three owners, two related and one
not. The property was not claimed for a homestead exemption, so it would
appear to be a rental. Reverse searches pulled up no clear results on the
owners. One possible lead on the unrelated owner brought me far, far out
of state, had no listed address, and the phone number was on the do-not-call
list. A search under the property's address pulled up no information on
the current resident. I drove to the house and found the outside in
reasonable shape, but no one was home. I asked several neighbors, but
those who were home did not know the current residents. Contact had not
been made with anyone, and the auction was less than three weeks away. In
the end, I wrote a letter stating that I had interested investors.
That was yesterday morning, 9 AM to 12 Noon. My letter should arrive
today. In the meantime, I'll be digging in and repeating the process over
again.
Wade Ogletree
You're due for a touch of Southern Profitability. Southern
Investor is your real estate investment resource, presented by Wade
Ogletree, Century 21, Professional Services.