California alone accounted for almost 1/4th of all default filings. It had 57,158 foreclosure notices distributed in January.
More and more homes aren't being purchased at the foreclosure auctions, and become REO Homes. This offers great opportunities for savvy investors and ordinary home buyers. A lot of these homes aren't being picked up by investors because they simply don't have any equity, and there is no profit in these foreclosure homes. At foreclosure auctions, the opening bid is usually the amount owed on the primary loan. When this loan amount is more than the property is worth, it won't be purchased on the court house steps.
How to Profit with Foreclosures without Equity
The best bet for savvy investors is to purchase the properties as Short Sales before the auction even occurs. Banks don't want to foreclose, and are often willing to accept less than the amount owed on the property to avoid foreclosure. Good Real Estate Investors contact owners of these homes when they receive their default notices, before most of these homes are even on the market or have any other competition. Lists of default properties can be found from services like RealtyTrac, Foreclosure.com, and Bargain Homes Network.
Deals at Foreclosure Auctions - Homes with Second Mortgages
When deals can't be negotiated with the distressed borrowers and the banks in preforeclosure, many houses can also be purchased at great discounts at the foreclosure auction. The best properties to try and buy at foreclosure auctions are those with second, junior liens. Over the past few years a popular trend for lenders was to offer 100% financing by using 80-20 loans. in an 80/20, the primary loan was for 80% of the homes value and the second loan was for 20% of the purchase price. At the foreclosure auction, the second loan will be eliminated, lost, shafted. These properties can usually be picked up for a little more than the value of the first loan, which at one time was 80% of the properties value.
Bank Owned/REO Homes can rarely be purchased for huge discounts, but are much more easy to purchase than short sales and foreclosure auction homes. REO properties are listed just like any other properties. They are usually priced below market value because banks want to get rid of them quickly, and they usually need some repairs. These properties are found on the MLS, and you get the aid of a Realtor to help you in your purchase of REO Homes. This is usually the only way to purchase foreclosures as first time home buyers.
Find REO Homes on the MLS Now: