Real Estate Blog

Will You Be A Foreclosure Statistic?
By Peter G. Miller Most owners who lose their homes in a foreclosure never thought it would happen to them. It always happens to someone else — you know — the people who get sick, laid off, have an accident, that sort of thing.

So you might think: Foreclosure. That will never happen to me. No way. But lurking in millions of mailboxes each month is a financial time bomb, a threat to homeownership never before seen in this country.

For the past few years the nation has been flooded with forms of financing which allow buyers to purchase homes that were once unaffordable. The essential deal is this: You buy now, pay less than you should each month and then within five years sell at a big profit or refinance.

Truth is, it’s been a great ride. Many people have followed the formula and made a ton of money. But like musical chairs, you just know that a bunch of people will be caught in the wrong place at the wrong time.

In a growing number of metropolitan areas, the wrong time is now. Just look at what’s happened to home prices during the past five years:

Metropolitan Area Home Price Trends

Source: National Association of Realtors

“The meaning of this chart is plain,” says James J. Saccacio, chief executive officer of RealtyTrac, the leading online marketplace for foreclosure properties. “In the summer of 2003, when mortgage interest rates reached bottom at 5.21 percent, no metropolitan area saw a price decline in the second quarter. The market was at its top in 2005 when almost 45 percent of all metro areas saw double-digit price increases. In 2006 the marketplace radically changed. Now we have the greatest percentage of second-quarter price declines in the past few years, virtually double any comparable period.”

Okay, so why are falling metropolitan prices a problem? If you’re not selling and you’re not refinancing, who cares?

Falling prices are not a problem for those with fixed-rate loans. But for millions of borrowers with the latest forms of low-ball financing, falling prices can be financially lethal.

Imagine that you bought a property a few years ago. Since values were going up it made sense to buy the biggest home you could afford and to buy that big house you got a $400,000 interest-only loan at 5.6 percent, a mortgage amount that covered 100 percent of the purchase price.

For the first five years the loan was wonderful: Monthly payments were $1,867 plus taxes and insurance. But after five years, the loan automatically converted to a one-year ARM. The one-year LIBOR rate that was originally at 3.60 percent five years ago reached 5.45 percent this August. Combine the LIBOR index rate with a 2.0 percent “margin” and your loan rate jumped to 7.45 percent.

After five years not only does the rate go up, the mortgage bill now includes the expense of monthly principal payments to reduce the loan balance. The monthly cost for principal and interest? It’s now $2,943. Taxes and insurance are again extra.

“Those low-payment loans that looked so good a few years ago are going into their second phase,” says Saccacio. “Each day more and more borrowers are finding that the low ’start’ payment is gone and that steeper, fully-amortizing payments have now kicked in. At the same time, homes that were once easy to sell are now harder to market. It’s a brutal combination and what we’re seeing in the Fall of 2006 is likely to get worse.”

The instant solution to high monthly costs is to sell the property. During the past five years many areas have seen huge price increases. The odds are good in most markets that a seller with several years of ownership at this can readily sell, often with a significant profit.

But as the market evolves the odds may become less attractive. Not all markets have seen double-digit growth. In such areas price stagnation or actual declines can lead to huge inventory increases. To sell in down markets homes owners will be forced to offer not only price discounts but other incentives such as “seller contributions” to help buyers at closing, new carpets, new kitchens, moving allowances, etc.

But selling also may not be an option. Not only can a sale in a down market produce a bankrupting loss, but losses on the sale of a personal residence are not tax deductible.

What can you do to avoid being a foreclosure statistic, to not get caught in the impossible position of loan costs that are too high and market values that are too low?

“Act now,” says RealtyTrac’s Saccacio. “Don’t wait for the hammer to fall. If you see a mortgage problem looming in the next year or so, refinance to a long-term, fixed-rate loan before your credit report shows any late or missed payments. Take a careful look at traditional loans with liberal qualification standards such as FHA or VA financing. Speak with your lender about a loan modification and see if your adjustable-rate mortgage has a conversion feature, a right to switch to a fixed-rate within the first few years of the loan term. Because a conversion is a loan modification and not new financing, conversion can be quick and cheap.”

If you find a situation where the property cannot be reasonably refinanced, if unaffordable monthly costs are certain, then it makes sense to sell now and move to a less-expensive home with reduced debt, lower monthly costs and fixed-rate financing. Moving is a way to avoid foreclosure and dodge bankruptcy — two events no property owner should experience.

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Peter G. Miller is the author of The Common-Sense Mortgage and is syndicated in more than 90 newspapers

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For people willing to do a bit of homework, the foreclosure market offers some of the best opportunities available in real estate today. Experts point toward significant growth in available foreclosure properties, so there’s never been a better time to line up your resources and educate yourself about this previously hidden market. It’s not unusual to save from 10 to 30 percent of the market value on a foreclosure property, and certain properties offer savings of 50 percent or more! There really are bargains out there. You just have to know where to look.

Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, homebuyers can use these services to identify and research potential home purchases, as well as to find the tools and professional resources they need to help them close the deal. RealtyTrac, which provides all the foreclosure data for both MSN House and Home and Yahoo! Real Estate, has already compiled a list of over 550,000 foreclosure properties across the country.

The keys to a successful foreclosure property purchase are diligence and patience, along with taking an educated approach to investing in this market. RealtyTrac CEO Jim Saccacio offers five tips to help you close a deal on a foreclosure property:

1. Learn about the different types of properties and the foreclosure process.
Not all foreclosures are the same! You need to educate yourself on the difference between the three basic types of properties, including notice-of-default (NOD), notice of trustee sale (NTS), and real-estate-owned REO, as well as the positive and negative aspects of buying at each stage of the foreclosure cycle.

As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and cost involved in going through the process. Another critical point in the process is immediately prior to the auction date, when all parties might be most open to a last-minute solution.

2. Secure financing early
It’s important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate.

3. Engage a real estate agent as a “buyer’s representative”
There’s a distinct difference between a buyer’s and a seller’s representative. Buyer’s representatives have the home buyer’s interests at heart, and are charged with finding the right property and negotiating the best price for their clients. Picking the right real estate agent will make your life much easier. Ideally, select an agent who specializes in the foreclosures market and has specific experience in REO properties.

4. Do your homework
Purchasing foreclosure properties is somewhat more risky than buying traditional real estate properties. But, with that risk comes reward in the form of much higher potential savings. With the right examination and due diligence, buyers can significantly reduce the risks. As with any purchase, timing is everything! But, it makes sense to give any property under consideration a thorough examination, including determining its condition and value, finding out the amount in default and the remaining loan balance, and running a legal investing report to make sure the property is free of any financial liabilities. Of course, it never hurts to foster a positive relationship with the seller!

5. Make a realistic offer
If you want to be taken seriously as a buyer, you must be realistic when preparing an offer. Lenders aren’t likely to give properties away, particularly in a real estate market where prices continue to rise. Additionally, homeowners in financial distress may be difficult to deal with, particularly early in the foreclosure process. An educated buyer—one who knows how much is owed on the property and what its market value is—can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.

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Bad Credit Mortgage Refinancing

Many times due to unexpected financial expenses; medical bills, auto repair expenses, home repairs, or even missed mortgage payments, a persons credit may be less than perfect. If your credit is less than perfect don’t despair, you can still refinance your mortgage by applying to one of many Bad Credit Mortgage Refinancing Programs. There are literally thousands of lenders across the United States that specialize in all different types of mortgage programs for people who have less than perfect credit.

Applying for this type of loan as well as the application itself is pretty standard, the terms and conditions, as well as the costs associated with obtaining the loan is where the differences arise. Cost as well as services can very widely, the good news is these lenders are out there by the thousands, this makes them very competitive. So shop around, just because you have less than perfect credit, you are not at the mercy of the mortgage companies. There are plenty of lenders out there who have programs that can help people with bad credit.

These lenders are not the typical bank you find down the street. They are mortgage brokers, people who work with borrowers looking for mortgages. They counsel, educate, and locate loans for people who find themselves in situations which cause them to have trouble finding a loan on their own because of their special needs.

The best place to begin your search would be the internet; it has not only a large list of lenders but also a wealth of information about rates, terms and conditions. Do your homework first and then make an attempt to contact no more than four lenders, allow for them to assess your situation, than base your decision on the offers you receive, and how well the offer meets your needs and budget.

Keep in mind the number of times and different places you apply for credit in a year effects your credit score. The magic number is thought to be four; anymore than this will drop your credit score even lower thus increasing your problems. The internet makes applying for a mortgage quick and easy but you should never use the blanket approach. In the case of applying for a mortgage, more is definitely not better. Do your homework first, and if you choose to use a website like LendingTree , which will submit your application to various lenders for you, pick just one. Submitting your application on more than one of these sites will get you more offers but will lower your credit rating in the process.

Any sort of confusions can lead to problems; if you have any questions you should discuss them with the lender or broker. They can help you with your financial situation and save you money, all of which combined leads to a tension free life. Good luck and remember it’s your money, spend it wisely. No matter what the situation always seek the best and most cost effective solution.

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A License to Sell Loans
By Peter G. Miller Have you ever looked at the paperwork you get when financing or refinancing a home?

Really. No kidding. Have you ever read the stuff people want you to sign?

There are a lot of scraps thrown our way at closing, and I have yet to meet anyone who has either read all of the documentation or totally understood what it meant — me included.

However, there is one piece of paperwork I very much understand and you should too: My loan officer doesn’t work for me. He’s not my agent and he’s not required to get the best possible rates and terms for me.

For proof, let’s turn to some of the paperwork I received from a recent loan:

“This fee disclosure represents the entire agreement between the parties hereto and no waiver or modification, or any other addition to the terms hereto shall be deemed effective unless evidenced by a written instrument signed by all parties hereto. It is further agreed that this disclosure shall be construed as creating no more than a contractual agreement between the parties hereto and not any type of agency relationship, fiduciary responsibility or other trust relationship or responsibility.”

The oddity of this situation is overwhelming: A real estate broker or attorney must place your interests first while a car salesman, telemarketer or loan officer has no such obligation.

You can see the conflict.

Where do borrowers get mortgage information? From loan officers. Borrowers are absolutely dependent on loan officers to scout the marketplace for the best possible deals given the borrowers’ financial profile.

How do loan officers and lenders maximize incomes? Just like car salesmen and telemarketers, by selling products which produce the highest commissions and the largest revenues.

It doesn’t have to be this way. For example, since 2001 North Carolina law has required mortgage brokers to “make reasonable efforts, with lenders with whom the broker regularly does business to secure a loan that is reasonably advantageous to the borrower considering all the circumstances, including the rates, charges, and repayment terms of the loan and the loan options for which the borrower qualifies with such lenders.”

The problem with the North Carolina law is that it does not apply to any federally regulated lender. However, under the proposed Borrower’s Protection Act (S 1299), legislation introduced by New York Senator Charles Schumer, every mortgage loan officer across the country would have a “fiduciary relationship with the consumer.” In other words, the job of the lender would be to get the borrower the best possible loan.

Instead of supporting such legislation, the mortgage lending industry wants a different approach: According to John Robbins, Chairman of the Mortgage Bankers Association, his group supports the “national, uniform regulation of mortgage brokers including a national database of approved brokers. A clear, fair national regulatory standard for mortgage brokers is an essential step to establishing much better mortgage lending protections for borrowers.”

Such standards, says Robbins, “must be national in scope to enhance competition in all markets for all borrowers, especially nonprime.”

The catch is that if there are uniform national standards then state laws such as those in North Carolina would become useless. Under the concept of preemption, when federal and state rules conflict the federal rules take precedence.

And what national standards do lenders oppose?

As one example, Robbins says his group is “concerned with language regarding the prohibition against lenders and brokers steering borrowers into loans or loan terms that are not ‘reasonably advantageous to the consumer, in light of all the circumstances.’ While MBA opposes steering and favors informed consumer choice, this type of standard would force loan originators to determine whether a loan is suitable for a borrower. MBA has carefully studied the issue of the potential effects that the imposition of a variety of approaches to suitability would have on the mortgage market. MBA has concluded that imposition of such a standard would not provide benefits that would outweigh the costs to consumers, lenders and other market participants.”

How, exactly, would consumer costs increase if lenders were required to place borrower interests first? Would not loan expenses go down if lenders were obligated to present the best possible options to client borrowers? If loan costs were reduced, would not mortgage delinquencies and foreclosure levels decline? Aren’t such results good for lenders and investors?

Robbins says his group “does not believe that a disclosure of function and fees is warranted for mortgage lenders. Unlike a broker whose role may be uncertain — agent or loan provider — a lender’s role is clear. A lender underwrites, approves and funds the loan. The lender does not hold himself out as an agent of the borrower. While a lender must serve its customers fairly, and the industry has done much to assure high professional standards, a lender owes a duty to its shareholders and investors. A borrower knows a lender offers its own products and does not offer to shop for borrowers.”

Borrowers know such things? How many mortgage ads explain that a lender is not selling the best possible loan to a borrower?

“Regulation limits competition,” explains Jim Saccacio, Chairman and CEO at RealtyTrac, the nation’s largest foreclosure resource. “When we regulate doctors, lawyers or barbers, we’re saying that not everyone can open a clinic, law office or barber shop. In exchange for limiting competition and therefore raising the income of licensed professionals, as a society we expect those who are licensed to meet certain standards of education and responsibility.

“If we’re going to have uniform regulation nationwide that limits mortgage competition, then the public should get something in return,” Saccacio explained. “That ‘something’ should be the expectation that my lender will take every reasonable step to get me the best possible loan and that I will know all the fees, charges and commissions involved. That’s no more than someone buying a shirt in a department store would expect — and no less than borrowers should accept.”
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Peter G. Miller is the author of the Common-Sense Mortgage and is syndicated in more than 100 newspapers.

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Most people hire a real estate agent to sell their home, but overlook the importance of having an agent when buying a property. While in some cases it’s possible to negotiate your purchase through the seller’s representative, make no mistake: these seller’s representatives are charged with making the sale and negotiating the best deal for their clients — the sellers! With that in mind, it’s best to secure your own representation as a buyer, in order to minimize potential conflicts, and make sure your interests are represented.

In the more complex foreclosures market, a Buyer’s Agent can be even more valuable. The agent can help you negotiate with the owner before a property comes on the market and can also act as a buffer during the negotiating process to make sure you’ve completed all the necessary steps before closing. Done right, it’s like having your own personal tour guide to help you find your way through the foreclosure buying process.

For buyers looking to uncover substantial bargains in real estate, the foreclosures market does offer a treasure trove of opportunities. Foreclosure properties are some of the best opportunities in real estate today with savings of 10-30 percent below market value. Some properties offer savings of up to 50 percent or more! But like any investment offering a high return, there are sometimes higher risks involved in buying a foreclosure than in buying more traditional real estate. One of the ways to maximize the value while minimizing the risk is to work with Buyers Agents who specialize in this market, with specific experience navigating the twists and turns that come with purchasing a foreclosure.

“If you’re in the market for a foreclosure property, you should really take some time to look for an agent with actual foreclosure transaction experience,” explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace. “The nuances of this market make it a different animal from conventional real estate, so buyers owe it to themselves to secure a seasoned agent who’s familiar with the foreclosures process, and has knowledge of local, regional and state laws.”

RealtyTrac’s National Agent Network connects prospective buyers of foreclosure properties with local agents who specialize in foreclosures. Homebuyers can go to http://www.jdoqocy.com/click-2602586-10449957?url=http%3A%2F%2Fwww.realtytrac.com%2Fgateway_cj.asp%3Faccnt%3D12494%26password%3DCJa to identify and research potential home purchases, as well as to find all the tools and professional resources they need to help them close the deal.

Of course, it’s also important to consider the agent’s knowledge of the area where you wish to purchase property, their ability to close a deal, and their access to other professionals such as attorneys, lenders, and title companies. It’s often a good idea to interview two or three agents to ask about their credentials and to test out chemistry, just as you would when selecting any valued business partner. Ask for references from previous buyers to see what people who have been in your shoes have to say about the agent’s credentials and demeanor. Ultimately, your agent should make you feel confident that they know how to steer you correctly through the foreclosure buying process.

Here are some questions to ask a prospective buyer’s agent if you’re buying a foreclosure:

• Are you a licensed, full-time an agent?
• Are most of your clientele buyers or sellers?
• How long have you worked with foreclosure real estate?
• How many clients are you working with presently?
• Do you have former clients I can contact as references?
• How will you help me contact owners in default?
• Are you familiar with the foreclosure laws in this area?
• How much commission will I pay as a buyer?

Once you’ve selected an agent, you’ll need to set up some ground rules for how you want to work together, such as times you are available to view homes, expectations regarding the agent previewing properties on your behalf, and courtesies expected by both parties.

Keep in mind that even the most intuitive agents are not mind readers. You need to make your preferences, priorities and spending limits clear up front, so neither party wastes valuable time looking at properties that don’t meet your needs.

Finally a word about etiquette: While you don’t necessarily have to commit to working exclusively with a single agent (unless you’ve signed an exclusive agreement with them), it’s most proper to ultimately extend your loyalty to an agent who spends a significant amount of effort helping you find a property. Remember, real estate agents work on commission, so the time they spend working on your behalf amounts to nothing if you don’t ultimately make a purchase through them. If for some reason, you find that your needs are not being met by a particular agent, it’s best to set the record straight early in the process, either to correct the problem or to retain alternate representation.

Working with a Buyers Agent can often result in a net savings on property purchases—whether traditional resale homes or foreclosure properties, and can also help inexperienced home buyers from making costly mistakes in negotiations, contract terms and property research.

Here is a step by step guide to help you hire a quality home improvement contractor.Before talking to any contractors the first thing to do is create a budget for the project. Without a budget you will be flying blind and may end up over spending. Having a tight budget will also help you make decisions about what kind of fixtures, and materials to purchase. Most products have a wide price range and having a budget will help keep you in line when making buying decisions.

After you have your budget dialed in get three written estimates from three different contractors. Be sure the estimate is complete; getting a “written” estimate on the back of a business card is not a sign of a good contractor. Getting three estimates will enable you to compare prices from different contractors. Reliableremodeler.com is a great service that will help you get free estimates from quality contractors for free.

Take the time to talk with each contractor and get a feel for which one you will be most comfortable working with and having in your home. Be sure and pay attention to things like who shows up on time and who is prepared to talk about your project. If a contractor shows up late to your appointment chances are they will show up late when working on your project.

While you are in the process of selecting a contractor it is a good idea to make sure they have the proper license, insurance, and bonding. All three of these items are in place to protect homeowners. Working with a contractor who isn’t licensed or doesn’t have the proper insurance might come back to haunt you. A good contractor will show you copies of these documents when they present your written estimate.

The next step is to check the references of the contractor you are leaning towards selecting. Be sure to ask specific questions about their experience with the contractor. “Did the contractor show up on time?” “Did the contractor clean up after themselves?” If you want to be more aggressive you can ask the contractor for the names and numbers of their last three jobs and call those instead of their handpicked references. This will provide a more realistic overview of the contractors daily work habits and skills.

The last step is to select your contractor and have them provide you a timeline for the completion of the project. Having a timeline will help ensure your project is completed in a timely manner.
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RealtyTrac, Inc., the leading online marketplace for foreclosure properties, provides all the resources that home seekers, investors and realtors need to locate, evaluate and buy properties at below market value. Founded in 1996, RealtyTrac sets a new standard for online real estate services by offering the largest database of pre-foreclosure and foreclosure properties, with more than 650,000 properties across the country, comprehensive property data, productivity tools and extensive professional resources. RealtyTrac hosts close to 2 million unique visitors monthly, and is the exclusive foreclosure data provider to AOL, Home Gain, MSN House and Home, The Wall Street Journal Real Estate Journal and Yahoo! Real Estate.

Buying a Foreclosure Property Below Market Value: Five Tips from the Pros
House hunting can be a very daunting experience, especially in today’s real estate market. Both investors and home buyers have been priced out of the market by escalating costs, and good real estate deals are increasingly difficult to find.

But there are bargains out there, for people who know where to look.

“For people willing to do some homework, the foreclosure market offers some of the best opportunities in real estate today,” explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace.

Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, homebuyers can use these services to assist them identify and research potential home purchases, as well as the tools and professional resources they need to help them close the deal.

With interest rates ticking up and ARMs adjusting upward, experts predict an increase in the number of foreclosure properties on the market. RealtyTrac, which provides all the foreclosure data for both MSN House and Home and Yahoo! Real Estate, has already compiled a list of over 550,000 foreclosure properties across the country.

“Foreclosure properties can be a terrific investment, or give home buyers a much more affordable option than traditional properties,” notes Saccacio. “But they’re not a way to get rich quick, and a foreclosure purchase needs to be approached in an educated, intelligent manner.”

Saccacio offers five tips to help you close a deal on a foreclosure property:

1. Learn about the different types of foreclosure properties, and the foreclosure process.

There are three basic types of foreclosure properties, representing different stages in the foreclosure process: notice-of-default (NOD) and notice of trustee sale (NTS), which are both pre-foreclosure properties; and real-estate-owned (REO), a foreclosure property which has been re-purchased by the bank.

For most consumers, buying a pre-foreclosure property from a private homeowner is the best option. It’s important that both the buyer and the seller see the situation as a win-win situation, in order to ensure a smooth process. In this case, the seller is able to get out from under a mortgage without destroying their credit rating, the lender is saved the time and expense of foreclosing on the property, and the buyer gets a below-market price on a home.

Foreclosure auction sales are typically the domain of the professional investor. These properties are formally in default, and sold to the highest bidder at an auction. Buyers are required to be physically present at the auction, and must pay 100% of the sale price in cash, on the spot. Though foreclosure auctions can offer significant savings, they are not for the feint of heart or the uninformed. Unless the buyer is already familiar with a particular property, there is usually little time to examine it. And the buyer will be competing against professional investors—and sometimes even the lender—at the auction.

Once the lender officially reclaims a home, it becomes a real-estate-owned property (REO). While REO properties typically offer more time for evaluation and a more standard bank-managed transaction, their prices are usually very close to full retail market value.

CHART: Stages of the foreclosure process Stage Positive Negative Pre-foreclosure: Notice-of-Default, Notice-of-Trustee Sale - Highest potential savings - Potential win/win scenario benefits all parties - Chance to evaluate property - Buyer / Seller negotiations can be difficult\ - Time pressure to complete transaction before auction Foreclosure: Auction sale - High potential savings - Immediate property ownership - 100% of the sale price required in cash - No time to evaluate property - Competing with professionals Foreclosure: Real Estate Owned (REO) - Affords significant time to evaluate property - Traditional bank financing - Lender often rehabs property - Lowest potential savings

2. Secure financing early

It’s important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate. It’s best to work with a lender who understands the foreclosure process, and can guide the buyer through certain steps, such as ensuring that a property is FHA-compliant. Another reason to consider pre-qualification is that not all lenders finance foreclosure properties. Having approved financing in-hand makes negotiations with both the seller and the lender easier, and may even make it possible for the buyer to simply cure the default and take over the existing loan to reduce loan processing fees.

3. Engage a real estate agent as a “buyer’s representative”

Most people hire a real estate agent to sell their home. These “seller’s representatives” are charged with making the sale and negotiating the best deal for their clients. “Buyer’s representatives” have the home buyer’s interests at heart, and are charged with finding the right property and negotiating the best price for their clients. Picking the right real estate agent will make a buyer’s life much easier. There are agents who specialize in the foreclosure market, with specific experience in REO properties. Look for an agent with foreclosure transaction experience, as well as knowledge of local, regional and state laws. But it’s also important to consider the agent’s knowledge of the area; their ability to close a deal; and their access to other professionals (attorneys, lenders, mortgage and title professionals) to ensure that the buyer is in good hands.

4. Do your homework

Stocks offer higher potential returns for investors than traditional savings programs, but are also riskier. Similarly, purchasing foreclosure properties is somewhat more risky than buying traditional real estate properties, but offer much higher potential savings. With the right examination and due diligence, buyers can significantly reduce the risks. It makes sense to give any property under consideration a thorough examination. Here are eight steps for doing a professional-level exam. CHART: Examination process steps

· Identify desirable neighborhoods – Identify specific neighborhoods where you’d like to live or own a home. This will limit your search to a manageable size for you and your real estate agent, and give your a sense of relative property values.

· Cast a wide net – There are a number of Web-based services that can put hundreds of thousands of foreclosure properties at your fingertips. Since the best savings are often found in pre-foreclosure properties, it’s important to check the percentage of pre-foreclosure (vs. REO) properties in any database before subscribing.

· Determine the property value –Look at the original purchase price, and recent comparable property sales to determine the current value of the property.

· Find out the amount in default and the remaining loan balance – In order to determine a reasonable offer price, you’ll need to know—at a minimum—how much money it will take just to satisfy the debt to the lender.

· Run a legal investing report – Before purchasing any foreclosure property, make sure it is free and clear of any bankruptcies, tax liens or other financial liabilities.

· Assess the condition of the property– If at all possible, visit the property, ask your realtor’s opinion, and review pest and structural reports to make sure that the property is in acceptable condition, or to determine how much of a rehab budget you’ll need to build in to your deal.

· Build a positive relationship with the seller – Before purchasing the property, try to make sure that you’re entering into a win-win situation with the seller, so that they’ll do what they can to make the process easier and leave the property in good condition

· Leverage your timing – Knowing when a property is going to be auctioned gives you an extra bargaining chip when negotiating with the seller or the lender.

5. Make a realistic offer

Despite what you may see on late-night cable TV, investing in foreclosure properties isn’t a sure fire “get rich quick” formula. Lenders aren’t likely to give properties away, particularly in a real estate market where prices continue to rise. And homeowners in financial distress may be difficult to deal with, particularly early in the foreclosure process. The keys to a successful foreclosure property purchase are diligence and patience. As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and cost involved in going through the process.

Another critical point in the process is immediately prior to the auction date, when all parties might be most open to a last-minute solution. It’s not unusual to save from 10-30% of the market value on a foreclosure property, and certain properties offer savings of 50% or even more. An educated buyer—one who knows how much is owed on the property and what its market value is—can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.

Now go out and familiarize yourself with the resources and tools available to take advantage of the opportunities offered by this formerly-hidden real estate market. With the experts pointing toward significant growth in available foreclosure properties, there’s never been a better time to line up your resources and get informed.

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