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Foreclosure Process
Hey everyone.
As a newbie here in Denver and trying to learn as much as I can before jumping into a deal, I'm curious as to what the options and next steps would be if I found a NED(NOD in other areas).
Let's say you find a NED that looks promising. From my understanding the first thing you should do is check the property records to see loan information on the property to check if it's the only loan etc.
Say that all looks good what would be your next steps?
Thanks for the advice!
Originally posted by @Braden Hobbs:Let's say you find a NED that looks promising. From my understanding the first thing you should do is check the property records to see loan information on the property to check if it's the only loan etc.
Hey I thought I was the only NED here.
I presume you are trying to buy a house before a foreclosure auction hopping the owner is motivated by the pending foreclosure. the first thing to do is talk to the owner and see if you are close to coming to a deal. Don't waste time researching mortgages and so forth before you have a deal.
In general you negotiate the deal and sign a contract then you do your research. A well written contract will deal with any bumps that come up after contract signing
Nope, @Ned Carey they have the goofy name of "Notice of Election and Demand" here.
@Braden Hobbs you have quite a while between when the NED is filed and when the sale actually happens. 140 days or some such, sorry, I don't have my notes handy. Prior to the sale you would deal with the current owner. You might be able to just buy it (if there's some equity), do a short sale (if not), or maybe catch up the loan and do a subject to under the right circumstances (not my cup of tea, but some folks do this.)
If you want to buy at auction, Denver county has sales every Thursday at 10:00 AM. They publish the list on Tuesday afternoon, so you're very pressed for time to check out the properties and get a title search. Not sure who can do searches that quick, but I'm sure it you attend some of the local REIAs you'll find someone who can. All other counties (AFAIK) have auctions on Wednesday, with lists published on Monday.
Another CO oddity is the auctions are handled by the public trustee, which is a county office. All the counties around Denver have a public trustee web site.
Auctions are cash on the barrelhead. Some counties stop the auction and you must pay right when you win the bid. If you can't, they continue the auction. Others you go to the back of the room and pay. At least one county lets you run to the bank and get a cashier's check and bring it back (Arapahoe, maybe?) Really tough to buy at auction here if you don't have your own cash.
First, allow me a moment to say welcome the BP and foreclosure investing.
I find that owners in foreclosure mostly come in one of two mental states. They usually start out in denial, figuring that their situation is temporary or in some way not real. As the auction looms and time has passed, every investor in the world will have hammered on them until they become jaded. You can reach them as they transition from denial to jaded. For this reason be prepared to make a lot of calls and face a high level of rejection. That's not to say don't bother, rather get your "GRRR" on and do it.
You're gonna hear I lot of "no's", so as @Ned Carey says, don't invest too much love investigating a property until you have some progress with the owner. Do try to connect with the owner early and often. It's usually better to talk to him before he signs a contract with a realtor, if that's possible. When you speak to him find out if he's underwater. It's significantly more complicated if the owner needs to short sell. Again, don't let that discourage you, instead get even more "GRRR" on and go for it.
There's a number of ways to invest in the foreclosure market. Buying preforeclosures is pretty straight forward way to get started. I hope this helps. Scream if you still have questions. Go find those default notices and market like a madman. Send letters, make phone calls and even better knock on some doors. Persistence and personal contact works best in this market.
Luck is for rabbits, so instead I wish you success.
Thank you for all the input guys.
@Ned Carey Can you elaborate a little on your contract process. One of my main concerns is getting an interested seller on the hook and not having time to get my ducks in a row. It sounds like a good contract leaves some exit strategies?
@Jon Holdman Thanks for all that auction information. For CO what methods do you use to check the title and any liens or money owed on a property. I use the county assessor's site but have noticed that it doesn't have all loans. One example I've noticed is if the owner has a HELOC on the property they have defaulted on, you see that as the NED but it won't be listed on the assessor's page.
@Tom Mole I hear you. It's a tough time in a person's life and they are definitely a little hostile. I'm still trying to figure out my best approach to relate with them and make them realize I'm trying to help them as well as myself.
@Braden Hobbs Heritage Title has a portal that you can use to do some checking on your own.
You have to ask for access and I'm not sure what that requires. I asked for it long ago at the end of a closing: "hey, by the way, do you guys have a way to get property data..." You can also use it to request an O&E report (owners and encumbrances report.) This is a quick and dirty title search.
But, before you bid you better run a full blown title search. So you have to find a company that can do these REALLY quick. Not sure who to refer you to.
You don't want to be looking at just the tax assessor data. You want to look at recorder data. You'd think these would be one system. They're not, at least not for any of the counties I've tried. All liens should show up in the recorded data. There's always a chance, though of some unrecorded lien. Sometimes it is useful to look at both systems.
If you want to play in that space, go to some auctions and try to talk to the bidders. Some won't, but with persistence you'll make contacts and figure out how to avoid expensive mistakes.
Originally posted by @Braden Hobbs:
Thank you for all the input guys.
@Ned Carey Can you elaborate a little on your contract process. One of my main concerns is getting an interested seller on the hook and not having time to get my ducks in a row. It sounds like a good contract leaves some exit strategies?
What I was referring to is the contract should state that the seller provides free and clear marketable title. It should also be clear what happens if the seller defaults. At the very minimum you should get your deposit back if the seller defaults. That way any title issue are not your problem.
You can put other contingency clauses for inspections or financing which give you some outs. Also you can give a very small deposit which limits your risk. lastly you can have a long time to close in order to find a wholesale buyer or deal with issues on your end. Of course all of these things make your offer weaker.
@Braden Hobbs I believe I was remiss in failing to make one further admonition. Be careful about offering to "help" the owner in foreclosure.
You and I know that despite your profit motive, you have altruism in your heart, but you don't want to find yourself trying explain your altruistic actions to a judge. HUD has been looking closely at complaints from the foreclosed where someone offered to "help" them.
To be fair there have been a lot of scammers helping folks out of their homes. Be not one of them neither by omission nor commission. Be instead clear about your reason for contacting the distressed owner. You are a real estate investor who makes a living "working" with homeowners facing foreclosure to find the best possible resolution to their problem. If you underplay your profit motive or overplay your altruism and someone loses his home, even if he originally agreed to it and signed all the necessary documents, you could end up answering a complaint. That would be somewhat unpleasant.
This ought not frighten you away, but rather better prepare you to be successful. Every successful business person eventually gets sued. The best prepared are usually victorious.
Remember, you "work" with homeowners, you do not "help" them.
All the best.
@Braden Hobbs if you are doing a contract with a person in foreclosure there are laws in Colorado about what you can and can't do (Colorado Foreclosure Protection Act). Colorado even has a specific contract and contract language. Real Estate Agents are required to use these documents. I would strongly recommend that you do so as well. Go to the state's web site and this is the form that you should use if you are buying a property in foreclosure. You might do well to attend one of the local title companies classes on foreclosure and short sales. I'm not sure that they still offer them regularly but Land Title does have a bunch of education for RE Agents. They might have suggestions or have one slated.
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Real Estate Agent Colorado (#IR044146)
- Reliant Real Estate, Inc.
