Do I need a special real estate agent to buy a foreclosure?

Question

I am wanting to buy my first rental property. Looking to buy Foreclosures in phoenix, Tempe, chandler, Scottsdale area. Can any agent help buy a foreclosure or should I go with a specific agent for Foreclosures only? Thanks

Andres

Natalie Brown · Answer

One of the best tips I have found while stumbling down the REO path is to start by talking to your LOCAL banker. Banks are, after all, the seller.  If you can get to a small bank that knows the area and market, they can get you to their bank's REO guy who is full of useful information. Also, not a bad contact to have if you work a region you know well.

Tom Mole · Answer

@Andres Rossini, are you looking for commercial property (read apartments with 5+ units)? If so, use a CCIM agent when you use an agent at all. Otherwise, while CCIM doesn't hurt anything, it just doesn't matter for residential.

As @J  Scott pointed out HUD foreclosures are special. You need a special realtor to make those offers. For typical bank foreclosures you don't usually need a realtor at all provided that you know what you're doing.

Usually you won't know about REO's unless a realtor markets it. In that case deal with that broker and make your offer.

If you're willing to go directly to the homeowners in preforeclosure, you should be able to skip all realtors altogether.

I find those homeowners to be a skiddish lot. There are two types homeowners in foreclosure; the delusional and the jaded. It may seem easier to talk to a realtor, but there's usually more profit in deal directly with the homeowner. If you learn how to develop rapport and lead them to understand that you're helping them resolve their nasty problem, you'll find more profitable deals not diluted by realtor commissions.

How you negotiate a foreclosure facing auction depends a great deal on whether there's any equity. If the homeowner owes more than the house is worth, I'd suggest to pass on that until you get a little more experience.

If the homeowner has some equity, you have the potential for a deal. Find out what the owner needs, then find a way to meet his needs at the lowest price point. Show him how, while you'll make some small profit, this solution is all about easing his pain. Make the offer, close the deal and get a renter in there.

Generally, in a case like this a realtor will add cost, competition and commissions. Nothing there that you need in your business. That being said, if you're not comfortable filling out the paperwork yourself and you think a realtor would give a confident feeling, then by all means hire a buyer's agent.

In this case a buyer's agent is PAID by the BUYER, meaning you and thus has a fiduciary responsibility to you. Most agents were never trained to do this, so interview a lot of them until you find someone who "gets" your vision. Pay this agent well and often. Let this agent close the homeowner, if you're uncomfortable with that. Let him fill out the paperwork and get the escrow started.

This post is really long, but perhaps it will help you.

All the best.

J Scott · Answer

Any agent can make an offer on a typical bank foreclosure for a prospective buyer.  That said, some banks can be very difficult to work with, and some are very picky about their paperwork, etc.  Having an agent that specializes in foreclosures (or is at least familiar with them) will be tremendously helpful for you.

Also note that HUD foreclosures require an agent to have a special login, which is typically provided on a broker-by-broker basis.  Not all agents will have the ability to offer on HUD foreclosures.

Andres Rossini · Answer

@Tom Mole please see reply above. I just learned how to use the @ function.

Andres Rossini · Answer

@Tom Mole I am realizing from your post and @J Scott post that HUD foreclosures and foreclosures are different. Very new to this. I will do some research but I imagine HUD is a better deal. Can I buy HUD with a loan? I ll only have enough for 20%. Also how can I find this special type of agent?

Thanks everyone for the information.

Adam Johnson · Answer

Most likely you won't need a CCIM starting out, though they certainly can teach you an entirely new level of investment analysis.  I can't remember the exact website, but if you type that into a search engine you should be able to find there organization which includes a list of members. They tend to focus on commercial but you may find one that also does residential.

Interview several local agents. Ask questions about them and their knowledge. Ask other local investors who they work with.

Adam Johnson · Answer

I don't think I am confusing anything. I am a broker without the CCIM designation.  By NY State law, I am forbiddden to give investment advice. Whereas a broker with CCIM designation can legally give investment advice in NY.

That said, I am an experienced investor that understands how other investors make money. That makes me more of an asset than a greenhorn agent that only sells "pretty" suburban homes to first time homebuyers.

Bob E. · Answer

@Andres Rossini Are you looking to buy an REO listed on the MLS or an actual foreclosure at the courthouse?

Buying an REO is fairly simple, buying at the courthouse is a completely different ball game.

I agree with what the others said about finding a good agent but don't overlook the power of doing things yourself.

With a website like rent-o-meter.com you can get a quick idea of what a 3/4/5 bedroom rents for in your target area(s).   Then start looking at properties in those zip codes and see what ones cash flow based on projected rent and purchase price, then verify any rehab cost and verify the rent for your narrowed down list.

Do I need a special real estate agent to buy a foreclosure?

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