Financing Forclosures
Hi Everyone! Got some basic questions for the pros. Some of my info- I am a newer Realtor, a mom of 2 baby girls, and an interested in buying forclosed property to improve and sell. I own a home with a $90,000 mortgage and about $60,000+ in equity. Home values in this area are crazy. Southeastern Mass. My question is- What's the best way to finance a forclosure? If I pick it up before auction is it best to work with the bank holding that mortgage? If it goes to auction should I be already set up with a mortgage broker to insure financing? In our area we have less than a month from notification to auction, $5,000 deposit from the winning bidder and 30 days to produce the balance. (I don't know if that is typical or not) I should mention that we are living on my husbands income at the time, I've taken some time off with my youngest ( 5 months old)and we have no cash. My credit is excellent and because of my profession have been approved for no income verification loans in the past. Would an equity line be best? or should I not tie this to my present home? I intend to rent my home for 2x the mortgage payment, I've listed it before at that price and had many inquiries. I would appreciate any info!! I would also eventually like to help my buyers see forclosed property as an option but only after I have the experience to help them!! Property values have doubled in the last few years and I'm seeing more & more forclosures and would like to get started! Thank you all!
It seems that you live in a very nice area in terms of buying foreclosures. If you have 30 days to come up with the money (less than $5000 deposit) then you should be able to easily find money providing you bought right.
Here in Iowa we have to produce 100% of the funds within an hour or two. This makes it nearly impossible to get conventional financing because you go to the bank wanting money for a house you don't even know if you can buy. The auction can be canceled an hour before or another bidder will bid you too high. Here you need cash to be a player.
It is my opinion that there are better deals working with the bank before they foreclose. You have the opportunity to let the bank see what the whole picture is NOW which allows them to make an informed decision and short the property far lower than they would ever bid at auction.
The best place to start would probably be a home equity line of credit (HELOC) on your home. You can use this money to fund the $5000 deposit and then whatever the bank wants for their down payment. You probably have room in there for two houses at a time, although I would caution you until you have experience.
Always, always put your investment properties into some sort of separate entity (LLC, S-corp, etc) for asset protection purposes. If you are bidding at the courthouse steps you oftentimes cannot get in the property beforehand and potentially don't know what you will run into.
GOOD LUCK
I live in Illinois. With a house that I'm interested in, the owners right of redemption ends 7/31 and the sale is 8/5. When can you negotiate with the bank. Can they deal with you while the owner still have redemption rights? And, by the way, in Illinois you also need cash and we have 24 hours to produce. 30 days would sure open up some more options.