| When folks find out that I buy houses
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| | Sometimes it takes quite a bit of
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| from distressed homeowners during the
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| | research to find a property that I can
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| preforeclosure stage, they always ask the
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| | make a profit on, but the rewards are
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| same question: "How do you find them?"
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| | worth it.
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| My simplest answer is: "At the
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| | Now, before you call me a mercenary just
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| courthouse."
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| | because I look for distressed properties
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| Distressed properties are always easiest
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| | to profit on, let me say this: Somebody
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| to find when a mortgage lender begins the
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| | profits from every foreclosure - and it
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| foreclosure process. (The process is
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| | might as well be you or me.
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| triggered when the borrower fails to make
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| | Some people think it is unethical to
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| a mortgage payment.) Technically speaking
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| | benefit from another person's misfortune
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| this is the "preforeclosure" stage. The
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| | of losing their home or investment
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| borrower/homeowner has missed one or more
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| | property by buying it from them in the
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| payments, the sheriff's sale or public
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| | preforeclosure stage. But I disagree. I
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| auction is looming on the horizon, and
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| | look at buying preforeclosures as
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| the homeowner realizes he may soon lose
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| | opportunities to help the distressed
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| his home.
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| | owners save their credit. When I buy
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| Depending on which state you live in, the
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| | their property, their debt is paid off
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| lender either records a Notice of Default
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| | and they are free to move on with their
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| (NOD) or files a judicial foreclosure
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| | lives.
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| lawsuit against the borrower. As soon as
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| | Foreclosures and other property distress
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| the foreclosure is public information,
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| | are caused by divorce, unemployment,
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| it's relatively easy to find.
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| | death, medical emergency, economic
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| So, depending on which property I'm
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| | downturn, and any number of personal
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| interested in, I either do a search at
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| | problems.
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| the county courthouse or I get the
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| | Recently, many homeowners bought
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| information from a legal newspaper that
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| | expensive homes or refinanced to take
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| has done the searching for me.
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| | equity out of their homes when the
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| The hardest part is finding a property
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| | interest rates dropped. Those that later
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| that has any equity in it. What I'm
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| | lost their jobs or had a medical
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| looking for is a Loan To Value (LTV) of
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| | emergency suddenly lost their ability to
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| 80% or less. For example, if a property
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| | make mortgage payments. Many of those
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| has a market value of $100,000, the
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| | houses are now coming on the market as
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| homeowner can't owe more than $75,000
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| | foreclosures because their owners haven't
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| -$80,000 on the property.
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| | been able to sell them.They think of me
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| Why? Because I can't spend more than
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| | as their guardian angel when I am able to
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| $75,000 - $80,000 for the property and
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| | buy their property prior to the sheriff's
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| still make a decent profit. That includes
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| | sale, save their credit, and pay off
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| what I pay for the property (principle,
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| | their debt.
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| interest, taxes, and insurance), my
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| | For the most part, homeowners understand
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| repair costs, and my holding costs. I
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| | that a real estate investor needs to make
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| have been known to pass on a great deal,
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| | a profit to stay in business. If the
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| simply because it was November and I
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| | homeowners are "upside down" in their
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| wasn't convinced that the property would
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| | house (meaning, they owe more than the
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| sell before summer. I always factor in
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| | property is worth), and there is no
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| having to pay the holding costs on a
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| | equity in the property, then it is very
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| property for at least six months while I
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| | unlikely that they will be able to sell
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| remodel or market the house. If the
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| | quickly -- to me or anyone else -- and
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| numbers don't work, I walk away.
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| | get out from under their debt.
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