Hard Money Loans Used To Purchase Foreclosures

Hard Money Loans Used To Purchase Foreclosures

Rehab loans can streamline and expedite the loan process when considering to purchase a foreclosed property.  However, if are on a limited budget, make sure to do your due diligence when inspecting the home for needed repairs.   Rehabbing a home can be troublesome, particularly if the foreclosed property is in need of significant repairs.

hard money

Using Hard Money Loans For Repairs

Common repairs you can expect when purchasing a foreclosed property are painting the home, replacing carpeting, fixing the molding and enhancing the curb appeal.  Rehab loans can provide that extra funding for additional repairs like changing the property layout and updating kitchens.

Hard Money Loans for Rehab projects

Cant get financed with your bank?  No surprise…the banks have tightened down on requirements for all lending options and borrowers find themselves in a bind for funding options.

Hard money lending is a great option to traditional financing for rehab projects.  Traditional banking options require extensive documentation, excellent credit scores, and will take several months to ultimately get an approval or denial for your loan.  Hard money lending is simple.  There is minimal documentation required and the process can be completed within a short week or two.  This option can get you moving on your rehab project quicker and with less stress.

To learn more about Hard Money rehab loans click here.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans | Tagged , , , | Leave a comment

Commercial Hard Money Lending – Get Funded Now!

Commercial Hard Money Lending – Get Funded Now!

If you’re looking for a way to get funding for a commercial property acquisition or refinance, our team at Hard Money Chicago can help. We are reliable commercial hard money lenders with the capability to offer loans from $100,000 to $2,000,000.

A lack of funding shouldn’t stand in the way of your ability to take the next step in refinancing or purchasing a commercial real estate property. We can work with you to help you get the loan you need as quickly as you need it, even if your credit history is less than perfect.

If you have attempted to get financing through traditional channels or cannot afford to undergo the lengthy process associated with those loans, get in touch with us for your commercial hard money loan. As experienced commercial hard money lenders, we’ve helped hundreds of people across the country achieve their commercial property goals—and we can do the same for you.

commercial hard money

  • Quick turn-around times
  • All credit histories accepted
  • No financials required
  • Loans ranging from $250,000 up to $5,000,000
  • Loan-to-value (LTV) up to 65%
  • 1-3 year terms, interest-only
  • Flexible underwriting
  • Competitive rates

An Appealing Alternative Funding for Commercial Hard Money Loans

When you receive a commercial loan from Hard Money Chicago, you can count on quick turn-around times, flexible underwriting terms, and a smooth path to closing—no more long wait periods or endless red tape. Regardless of your credit history, we can provide the funding you need for a successful real estate acquisition or refinance. Ask about our 1- to 3-year terms and our interest-only loans, which are designed to minimize your initial payments as you develop your new property.

Whatever type of commercial project you’re considering, Hard Money Chicago can make the financing process simple, efficient, and worthwhile. Contact us today.

Click here to apply for a commercial hard money loan.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans | Tagged , , | Leave a comment

Alternative Lending for Construction Loans

Alternative Lending for Construction Loans

By:  Kimberly Hoffman

The lending landscape has dramatically changed in the past four years, and traditional banking lenders have gone from full speed ahead to full stop on speculative construction loans and construction-to-permanent loans to builders. Neither of these extremes is practical nor sustainable, but savvy mortgage brokers can set themselves apart in the coming years and help their clients secure new construction loans with hard money lenders.

Although, traditional lenders’ appetite for this type of product fluctuates with the market, private money has long provided construction loans and continues to do so. Private-money lenders are understandably cautious with new construction loans, as many project future downward momentum on home values. These lenders also are sceptical of the effect of shadow foreclosure inventory that competes with new homes and is available for .50 cents to .60 cents on the dollar. Although, banks generally stay away from new construction loans, private lenders are still are willing to fund some projects, if they meet their lending requirements.

construction loans

There are 5 key things brokers must keep in mind when seeking new construction loans from hard-money lenders:

  1. Location – Be sure your lender is comfortable with your project’s geographic location. Typically, a private lender will only underwrite new construction loans if it can actually kick the dirt.
    The process: Acquaint yourself with the builder’s  draw process. Individual private lenders can be more liberal and pay  directly after a site inspection.
  2. Lot lien –  Know whether your private lender is comfortable with including some or all of the lot cost in the construction loan. Ideally, a private money lender wants a lot to be free and clear  to the first-position private-money deed of trust. Some private lenders may fund as much as 70% loan-to-value of the appraised value.
  3. Down payment requirements – Ask about the requirements for how much of the borrower’s own money must be in the project. The private lender will require a  up to a 30 percent nonrefundable deposit, which can be rolled into the takeout loan.
  4. Rates and fees-  Be able to speak in their terms about rates and fees. For example, the typical builder who previously used bank financing  may squawk  at a 6 month construction loan with a 12 % interest rate and 4 points, but you must show profits they can make on construction loans.

To apply for  construction loans click here.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans | Tagged , , , | Leave a comment

Get Started In Real Estate With Private Money Loans

Get Started In Real Estate With Private Money Loans

Contrary to popular belief, you don’t need to have a lot cash to get started in real estate. Below are a few options that you can use to fund your deals without any money out of your pocket.

1. Private Money Loans

A lot of people have money just sitting in the bank. The most interest they earn ranges from 0.5% to 1%. Keep in mind inflation is around 4%. That means that the value of their money is losing about 3% in value each year. Even high yield savings account can’t keep up with inflation.

You can borrow money from these individuals and give them a 12% – 15% return on their money. It’s not as hard as you might think. You just have to know how to present your (real estate) deals to them. Always have a credibility packet that explains how you work on your deals. Be sure you give them enough information so that it answers most of their questions.

So what is exactly is a private money loans?

Private money loans are made to a real estate investor that is secured by real estate.  Private Loan Investors are given a first or second mortgage that secures their legal interest in the property and secures their investment. The keyword here is “secured”; that means their money is secured by an asset, in this case the real estate property.

Let them know that you only buy properties at a maximum loan to value of 75%. For example, if a property is valued at $100,000, the Private Lender will never have to loan more than $75,000 dollars on the property. This is obviously a much safer approach from that taken by conventional lenders.  These banks get into trouble because they make loans at an 85%, 90%, or even 100% loan-to-value ratio leaving them no equity for transfer costs, if they are ever forced into a position where they have to take back the collateral property. That gives them enough security on their loan even if you default on your payment.

It’s a win-win for both of you. You give the private money lender a 10% – 12% return on their money backed by a secured real estate property and you make money on your deals without having to shell out money. This is a great way to start your real estate career.

2. Using Seller Financing For Private Money Loans

A lot of people think 100% seller financing doesn’t exist anymore. But the truth is you just need to know where to look and where to find deals like this.

A good start is to look for motivated sellers that have distressed homes that they want to dispose. Obviously they cannot sell their property to an end buyer because of the condition of their house. If they list it with an agent, they will be in competition with the other more “desirable” houses in move in condition. Because of this their property might be in the market for several months or might not even be sold. On top of that, even if they sell their property after a long period of time, they would have to pay commissions to the agent. A typical commission is around 6%. On a $200,000 dollar home, that is about $12,000 on top of the regular closing cost and escrow cost.

When the seller carries a loan with an investor, the house is rehabbed to be very desirable and in move in condition. The investor then lists the house and sells it quickly. The investor makes a profit, and the owner gets paid quicker without paying any commissions on top. It’s a win-win for both.

3. Leveraging a Business Line of Credit

One of the easiest ways to do 100% financing is by obtaining a business line of credit. A lot of people think they have to have an established company with a good cash flow to be able to obtain a credit line. But nothing can be further from the truth.

Even newly formed companies can obtain a business lines of credit by using their personal credit to qualify provided you know how to look for a company that knows how to get this for you. And the good news is, it won’t affect their personal credit score because the credit lines won’t even appear on your personal credit bureau. It will only show on your company’s credit. This would also give your company credibility and possibly have larger credit lines in the future.  And even if you don’t have a good personal credit score, you can always use a credit partner to cosign for your company.

So how do you leverage a business credit line? Simple, find a reputable company that offers a good business hat has no restrictions and can be used for real estate investments and rehab. A typical newly formed business can have up to $75,000 credit line and an established company can get up to $150,000. Even at $75,000, in some states, that is already enough to purchase one property and rehab it. Bear in mind that a business credit line is an unsecured loan meaning it doesn’t require any collateral and is as good as cash.

What if you’re from California or other states with a high price point per property? That is not a problem at all. You can still leverage your credit line in combination of hard money loans.

Most private money loans require you to put at least 20% down. And almost no one does 100% financing anymore. Maybe if you are a very experienced rehabber, a few hard money lenders will do 100% financing for you, but they will charge you 15% interest plus 3 or 4 points and they will split the profit 50/50 with you since they financed the whole deal.

That can hurt your profits tremendously. With a business line of credit, you can use it as cash to put a 20% down payment with your hard money lender therefore leveraging it so you can obtain 100% financing. And on top of that, you don’t have to split your profit with the hard money lender because you came up with 20% of the loan.

For example, you want to buy a $300,000 property. You can go to a hard money lender and put 20% down which is about $60,000 to purchase the property. Then use the rest of the credit line for rehab. Basically you get to fund a project with 100% financing without any money out of your pocket. And you can replicate this as many times as you want

To apply for private money loans click here

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans | Tagged , , , | Leave a comment

Using Trust Deeds to Secure Investment

Using Trust Deeds to Secure Investment

Your investment is secured by a deed of trust recorded against the title of the borrower’s property (the Property). Unlike deposits in a bank or savings and loan, which are generally insured by a federal agency (such as FDIC) and may usually be withdrawn with limited notice, the promissory note: (1) involves risk to principal (a typical feature of all investments); (2) establishes a specific and predetermined period of time for the repayment of your investment; and (3) does not benefit from insurance issued by a federal agency. In a deed of trust, the borrower (trustor) transfers the Property, in trust, to an independent third party (trustee) who holds conditional title on behalf of the lender or note holder (beneficiary) for the purpose of exercising the following powers: (1) to reconvey the deed of trust once the borrower satisfies all obligations under the promissory note; or (2) to sell the Property if the borrower defaults (known as a foreclosure). Foreclosure involves the process of selling the Property to a third-party bidder or, in the absence of a sufficient third-party bid, acquiring title to the Property.

Foreclosure Investment

The foreclosure sale, in most cases, satisfies the debt. Depending upon the method of foreclosure, the nature of the loan, the circumstances of origination, and the value of the Property, you may or may not be able to recover your entire investment. For example, if a third party bids at a non-judicial foreclosure sale an amount equal to or greater than the amount you are owed (including fees, costs, and expenses of the foreclosure), your investment would be fully paid. On the other hand, if you bid the full amount that is owed to you, including all foreclosure fees, costs, and expenses (full credit bid) and there are no third-party bids, you will generally be limited to the Property and its value as the source of repayment of your investment.

If the loan is a non-purchase money mortgage (deed of trust) and the Property’s value is insufficient to recover all you are owed, a judicial foreclosure coupled with an action for a deficiency judgment may be the only way to recover your investment; i.e., collect any difference between the amount received at the foreclosure sale and the amount of money the borrower owes you. Remember, the Property identified in the deed of trust is what secures your investment.

To apply for a secured trust deed investment loan  click here.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Mortgage Investments | Tagged , , , | 1 Comment

Hard Money Loan to Value Ratios

Hard Money Loan to Value Ratios

The hard money loan amount the hard money lender is able to lend is determined by the ratio of loan amount divided by the value of property. This is known as the loan to value (LTV). Many hard money lenders will lend up to 65 – 75% of the current value of the property. Some lenders will lend based on the after repair value (ARV) which is the estimated value of the property after the borrower has improved the property. This creates a riskier loan from the hard money loan lender’s perspective, because the amount of capital put in by the lender increases and the amount of capital invested by the borrower decreases. This increased risk will cause the hard money lender to charge a higher interest rate.

There are some hard money lenders who will lend a high percentage of the ARV and will even finance the rehab costs. This may sound great from the borrower’s point of view to begin with, but these types of loans have a much higher risk involved and the interest rate and points will be mush higher. Expect 15–18% interest and 5–6 points when a lender funds a loan with little to no down payment from the borrower. In some cases, it may be worthwhile for the borrower to pay these exorbitant rates in order to secure the deal if they can still generate profit from the project.

Borrower Requirements for a Hard Money Loan

As discussed earlier, hard money loan lenders are primarily concerned with the amount of equity the borrower has invested in the property that will be used as collateral. They are less concerned with the borrower’s credit rating. Issues on a borrower’s record such as a foreclosure or short sale can be overlooked if the borrower has the capital to pay the interest on the loan.

The hard money lender must also consider the borrower’s plan for the property. The borrower must present a reasonable plan that shows how they intend to ultimately pay off the loan. Usually this is improving the property and selling it or obtaining long-term financing later on.

hard money loan

If you’re ready to get your financing for your next project, Click and Apply

Apply for a hard money loan today.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans, Uncategorized | Leave a comment

Hard Money Loan For Investors

Hard Money Loan For Investors

As the name implies, hard money loan for investors is the business of lending money, usually secured by real estate, through private investors. These investors could be individuals with funds to invest or groups of individuals who pool their money to fund private loans and are generally secured by real estate.

Banks lend using: credit, capacity and collateral. Credit is the borrower’s credit score and payment history, capacity is the borrower’s ability to make payments, and collateral is the asset pledged as security for the loan. Borrowers well suited for a hard money loan usually do not fully qualify for the stringent credit and capacity requirements of a bank even though they have sufficient collateral. Hard money loans can be a great win-win scenario. The borrower wins because he or she gets the loan they desire, and the private money lender and the investor wins because they can create an opportunity to earn an above average return.

Finding the right hard money loan for private investors is tricky and difficult to do on your own. The important link that gets you the money you need from these private investors is hard money loans. (In the banking world this individual is commonly called a loan officer.)

The hard money lender is not an employee of any investor but rather a highly specialized entrepreneur who is in the business of matching borrowers with investors. The PML packages and coordinates your loan from start to finish and likely winds up servicing your loan as well. Because private loans are not “cookie cutter,” nor are the investors who provide the funds, every private money loan (PML) will have different private loans available at different terms because they each represent different investors. PMLs will typically also have a specialty such as construction loans, land loans, or multi-family loans, etc. Often the PMLs specialty is developed over many years in working with investors who may have a particular preference, or from personal past work experience in the specialty area.

So let’s say you know that your situation is “outside the box” of traditional lending and you are considering private lending. Here is the process that you should expect in contrast to working with a traditional lender, such as a bank:

Choose the right lender for your hard money loan

While banks are on every corner, such is not the case with private money lenders. There are a few ways to find these lenders. You can use a directory service, ask around for referrals, or use a search engine on the internet. Once you find a PML, ask them for references from both recent and long term clients. Request the name under which their private loans are serviced and vested, then research online or at the county court house the number of foreclosures these parties have done. While most private money investors have no desire to take your property as they best profit from your continued payment on the loan, avoid lenders with high foreclosure rates as this may indicate investors with very low flexibility or tolerance for any breech in repayment terms.

hard money loan

Submit a hard money loan Application

Once you find a private lender, you will likely have to complete a loan application and the Statement of Information (SI) to give the lender a snapshot of your financial situation. Be sure to provide complete and full disclosure on these forms. These forms provide the lender with an initial “picture” of you and your financial standing. The SI form is vital in facilitating a thorough title search on the subject property. The documents you must provide to support the information in these forms varies on your financial status, the type of loan you are seeking, and the collateral property involved. Examples are tax returns, financial statements, bank statements, valuation information on other properties owned, and leases. Each private, or hard money loan will have specific supplementary documents their investors require based on the type of loan you require.

To apply for a hard money loan click here

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Hard Money Loans | Tagged , , , | Leave a comment

Things To Know About Foreclosure Homes

Things To Know About Foreclosure Homes

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking repossession of the property securing the loan. The foreclosure process begins when a borrower defaults on loan payments and the lender files a public Notice of Default. The foreclosure process can end one of four ways:

  1. The borrower reinstates the loan by paying off the default amount to during a grace period determined by state law. This grace period is also known as pre-foreclosure.
  2. The borrower sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
  3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
  4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender).

This process allows for three opportunities for finding bargains on foreclosure homes.

foreclosure

What you should know about a pre- foreclosure

Pre- Foreclosure
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

 Foreclosure Auction
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.

Before you buy a foreclosure
You’ll need to make sure you’re armed with the resources you’ll need to find and buy foreclosed homes. You can start by searching free on RealtyTrac’s foreclosure database, which includes pre-foreclosure and auction properties across the country and a nationwide bank foreclosures list.

 

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Uncategorized | Tagged , , , | Comments Off on Things To Know About Foreclosure Homes

Good News For Investor Loans

Good News For Investor Loans

Investor loans are on the rise in 2016 and rent prices are going up!  In fact, rent pricing trumped home values in over thirty of the largest housing markets in 2015.  According to Rent.com 88% of investors with rental income raised their rental pricing in the past twelve months, and an additional 8% hike is predicted for 2016.

Investor loans make sense for those looking to live in the home down the road.

“In most metropolitan cities, monthly rent is comparable to that of a monthly mortgage payment, sometimes more,” says Heather Garriock, mortgage agent for The Mortgage Group. “Doesn’t it make more sense to put those monthly chunks of money into your own appreciating asset rather than handing it over to your landlord and saying goodbye to it forever?”

Home prices are stabilizing and more investor loans are being processed

For the first time in years, prices that have been climbing steadily upward are stabilizing, restoring a level playing field that helps buyers drive a harder bargain with sellers, even in heated markets.

investor loans

Tax breaks for investor loans

Tax laws continue to be in favor of homeowners and investors, so you’re not just buying a property, you’re getting a tax break! The biggest tax break is that if your home loan is less than $1 million, you can deduct all the monthly interest you are paying on that loan. With investor loans, buyers may also deduct certain home-related expenses and home property taxes.

For more information on investor loans click here.

 

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Mortgage Investments | Tagged , , , | Comments Off on Good News For Investor Loans

EVERYTHING YOU NEED TO KNOW ABOUT REO PROPERTIES

EVERYTHING YOU NEED TO KNOW ABOUT REO PROPERTIES

When seeking out investment opportunities, it’s important to leave no stone unturned. Buying properties that are dubbed REO properties or real estate owned properties is one avenue worth considering. Investing in REO properties offers certain advantages but it’s essential that investors understand the risks as well.

 What Are REO Properties?

 In the simplest terms, a real estate owned property is any commercial or residential property that has been repossessed by a bank or mortgage lender. The process by which a property becomes an REO property is fairly straightforward.

When a property owner fails to meet their mortgage obligations, the lender can initiate foreclosure proceedings to recoup the loss on the investment. If the property does not sell at auction or the lender is the highest bidder, the lender assumes ownership. Once a property becomes real estate owned, the bank or mortgage company will prepare the property for sale and put it on the market.

 Why REO Properties Are an Attractive Option

 From an investor’s perspective, REO properties may be more appealing than a regular resale property for a few reasons. First, the lender may be highly motivated to sell the property. If that’s the case, you would have a bargaining chip of sorts when it comes to negotiating things like the final purchase price and closing costs.

In some ways, buying directly from the lender can be easier because it eliminates certain problems that can arise when a homeowner or commercial property owner is involved. For example, with a bank-owned home, the buyer would not have to be concerned about emotions directing the negotiations.

It’s also possible to pay less for an REO property than you would a property that’s seller-owned. These properties may be priced at or below market value, which is a plus for buyers who are hoping to get a deal.

reo properties

 Finding REO Properties for Sale

 There are several avenues investors can use to locate REO investment opportunities. The first is to search through REO listings online. RealtyTrac, for example, offers residential REO properties while LoopNet has an extensive database of commercial listings.

Another option for finding REO properties is approaching lenders directly. Larger banks often have an entire department dedicated to the sale of REO properties and they may feature listings on their website. With a smaller bank, it may be necessary to contact a local branch to determine whether any properties are available and who oversees sales.

Enlisting the help of a real estate agent can also be useful in pinpointing REO opportunities. Look for an agent who specializes in dealing with these types of properties in the market segment that you’re interested in.

 Buying an REO Property

 Finding a suitable real estate owned property is the smallest hurdle buyers must overcome. The next and more challenging phase is negotiating the purchase of one of these properties.

There are several things buyers must be aware of going into the negotiation process. First, individual lenders can set their own guidelines for the sale of REO properties. For instance, some lenders may require a larger deposit of earnest money or stipulate that the deposit be nonrefundable.

Next, REO properties are usually sold “as is”, which means the buyer is responsible for covering the cost of any necessary repairs or upgrades. An inspection and appraisal are part of the buying process but these don’t occur until after an offer has been made. It’s a wise move to include a clause in the offer allowing for retraction if the inspection uncovers a major structural issue.

When formulating an offer, buyers should use the property’s fair market value as a guideline. Depending on how much competition there is for the property, the starting bid may be the same as the lender’s asking price. If there are no other interested buyers, it may be possible to negotiate a discount but be wary of undercutting the price too much.

One final consideration to keep in mind is financing. Buyers who are not paying with cash will need to get pre-approval for a loan prior to making an offer. When a property requires substantial work, it may become more difficult to obtain a loan without offering a larger down payment.

 Selling REO Properties

 While some buyers purchase an REO with the intention of living in the home, others see it purely as an investment opportunity. Investors who hope to turn a profit by reselling the property will first need to make it as attractive as possible to buyers.

From a cosmetic standpoint, that may involve completing renovations on the interior or exterior, which is something you’d need to budget carefully for.

In terms of ensuring the property is physically sound, that would require addressing any issues raised during the inspection process.

Once the property is ready, the next step is bringing in a real estate agent to help with the sale. The agent can offer insight into how to set the sale price and what the best strategies are for marketing the property.

 Risk and Rewards of REO Properties for Investors

 Investing in a real estate owned property offers several benefits for investors compared to other types of real estate. In most cases, for example, the lender will take steps to clear any tax debts, liens or title issues connected to the property before offering it for sale so there are fewer obstacles to buying.

The lender is also responsible for removing any occupants of the property prior to the sale. That applies to homeowners who may be resistant to vacating a residential property or tenants of a commercial property. That allows the investor to avoid the time and expense associated with having to initiate eviction proceedings.

Again, perhaps the strongest incentive for investors is the potential to earn a decent return with one of these properties. A lower asking price can positively impact the property’s profitability once the investor is ready to sell it or rent it out.

 In terms of the drawbacks, there are some pitfalls to keep in mind beginning with the property’s condition. If the inspection fails to reveal any major damage that isn’t discovered until after the purchase is complete, the investor is responsible for addressing it. Having to spend additional money to get the property ready for resale or leasing can eat into any profits you’re anticipating.

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Posted in Real Estate | Tagged , , , | Leave a comment