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Posted over 9 years ago

Phil Pustejovsky Reviews Government Foreclosures

The government foreclosures I Phil Pustejovsky am going to review include Fannie Mae, Freddie Mac and HUD foreclosures. These were properties that had loans backed by Fannie, Freddie or FHA, the payments went into default and eventually were foreclosed upon. Rather than the bank who issued the loan being stuck with the property, since one of those three institutions backed the loan, they became the owner of it. And all three handle their foreclosures with a very similar process:

(1) REO Agent Assignment: The first step is the foreclosed property is assigned to an REO Agent.

(2) Renovation: The second step is the REO Agent requests bids from contractors to renovate the property to a standard to which a retail buyer could move in. They often choose the absolute lowest bid because the government is cheap and doesn't want to pay for quality rehab work. The result, therefore, is the cheapest paint on the walls, the cheapest carpet and pad on the floors and the bare minimum everywhere else so that it can pass an FHA inspection (in the event a new buyer will be applying for a government backed loan). And the REO Agent crosses his or her fingers that Fannie, Freddie or HUD actually sends them a reimbursement check for the money they paid the contractor.

(3) Traditional Listing: The third step is the agent lists the property on MLS in search of a retail buyer. In fact, for HUD foreclosures, the listing clearly restricts non-owner occupant offers until at least 30 days after the property is first listed and in certain areas (such as Amarillo, TX), government workers are given down payment assistance to help buy HUD homes.

You may be asking yourself, "So where do investors fit into the government foreclosure scene?". Freedom Mentor, I'm glad you asked!

(4) Liquidation: Sometimes, these government foreclosures do not get any offers from retail buyers. So the agent drops the list price. And sometimes there is still no activity. Usually, after 90 - 120 days, Fannie & Freddie government foreclosures go to auction or get bundled up into a bulk REO package. For Fannie Mae foreclosures, you'll find these auctions at HomePath.com. For Freddie Mac foreclosures, they are auctioned off at HomeSteps.com. HUD foreclosures usually continue to have price reductions until an investor purchases the property. Learn more at HUDhomestore.com. This is where investors bid on government foreclosures. Some master the art of bidding and exploit loopholes such as when a successful bidder backs out prior to closing.

Personally, my issue with government foreclosures is that due to the process, it is extremely rare that an investor can pick up a truly great deal simply because investors are last to the party. As Andrew Carnegie was credited as saying, "the first one gets the oyster, the second one gets the empty shell." Certainly I can't blame the government for renovating and trying to resell to a retail buyer. I do the same thing! But if a property doesn't sell, it usually means it wasn't renovated enough for a retail buyer to want to purchase it. Therefore, as the investor arriving late to the party, you have the choice of ripping out shoddy work and re-painting, re-carpeting, etc (which means you have to buy it extra cheap to do so); or you buy it and then rent it out (or sell on a Rent to Own) and have the headaches of potentially having to replace the cheap materials a year later.

The vast majority of government foreclosures that investors purchase end up becoming rentals because the market doesn't allow them to be purchased cheap enough to rehab and resell. And for traditional investors who are looking to buy rentals, government foreclosures can be a never ending source of deals. Freedom Mentor Review However, usually those traditional investors who put down 20% and get a loan for the rest don't have an unlimited supply of capital and credit. (Whereas if you creatively finance your rentals, you never tied up much capital or your credit and therefore have no limits on how big your portfolio can grow.)

So perhaps the best position to be in is the real estate agent who masters the art of offering and bidding on aged government foreclosures and makes a commission on a whole lot of them by representing multiple traditional investors. or by reading these Phil Pustejovsky Reviews. So long as the marketing engine for bringing in new traditional investor buyers never slows down, you'll always have a steady flow of inventory and buyers.


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