The United States Department of Housing and Urban Development, often abbreviated HUD, is a Cabinet department of the United States federal government. Although its beginnings were in the House and Home Financing Agency, it was founded in 1965 to develop and execute policy on housing and cities. It has largely scaled back its urban development function and now focuses primarily on housing. Another program the department offers is sponsoring mortgages so that low- to mid-level income individuals can purchase a home.

HUD Auctions

A HUD auction is a form of foreclosure auction except the original lender was a federal agency instead of a private lender. The United States Department of Housing and Urban Development (HUD), is the insurer of loans made through a variety of government programs, particularly FHA loans. When a lender forecloses on a government insured loan, HUD takes possession of the property.

Buyers of HUD homes as their primary residences are given first priority. Those who make a full-price offer to HUD using FHA-insured mortgage financing receive seller concessions from HUD enabling them to use only $100 down payment. If the properties are not sold to an owner-occupant, investors and others may bid on them.

HUD homes are available in nearly every state. Though they take some research and commitment, they can be a great deal for investors. If you’d like to invest in HUD properties, the auction process is different from a public auction or trustee’s sale. Here’s the general process you will follow:

1. Begin by searching through the HUD listings to find available properties in your state/county. Drive by the property to see the condition of the property and check out the neighborhood. Chat with the owners or neighbors if they are available. There are several benefits to talking with locals, they may have a wealth of information about the property (and hidden problems) and/or you may be able to make a deal with the homeowner prior to the auction.
2. Check the status of the auction. HUD homes are first made available to owner-occupant buyers. They must live in the home for 12 months after purchasing. If no one places a bid that is accepted, then the property is opened up for investors to bid on. A new auction date will be set and you will need to place your bid prior to this date.
3. Gather information about estimated market value and any additional liens. With the help of your real estate agent and research, you can determine a realistic market value of the property which will help you decide on your maximum bid amount and determine if the opening bid amount is a bargain. Visit the county recorder’s office to find out how much is still owed on the property as well as any additional liens that may be attached to the home. While some liens may be removed from the property, others (such as tax liens) will have to be paid by the buyer after winning the auction.
4. Find a HUD approved real estate agent. You will need an agent to navigate this process for you and they must be HUD real estate agents (most of them are).
5. Get a letter of pre-approval or pre-qualification from your lender. You will need to submit this letter prior to placing a bid to prove that you have funds available to pay for the property. A pre-approval is a more timely process as the lender requires more information as they approve you for a certain amount. This is a comfort when bidding as you are sure to have the funds available when you win the bid.
6. Complete an application packet. Your real estate agent will help you complete this packet and submit it prior to placing a bid on the property. Information for this packet includes your bid amount, personal information and several disclosures.
7. Present an earnest money deposit. Prior to placing a bid on a HUD home, you will be required to give an earnest deposit to your real estate agent. This is a certified check or money order for a pre-determined amount (usually $500 to $1000). If you do not win the property, this deposit is returned. However, if you win the property and fail to fulfill your obligation to purchase the property, this money is not returned.
8. Take possession of the property. If you are the winning bidder, get all the necessary documents to show that you have won the property. The auctioneer and a real estate attorney can help you determine the next steps to take over the property. The time frame for this varies from state to state and can last from a few days to a month. Some properties also have a redemption period where the homeowner can pay the delinquent amount along with processing costs and regain possession of their home. If this is the case with your property, avoid making any changes to the property until the time has passed.
9. Eviction of occupants may be necessary. In some cases, the trustee will evict the residents. If you are responsible for this, contact a real estate attorney or the county sheriff to find out the procedures for your state/county.

• Defaulted mortgage payments
• Seizure by IRS because of tax non-payment
• Nonpayment of real estate tax
• Probate after death
• Property abandonment or condemnation

Auctions are the riskiest way to buy foreclosures and should be used only when the investor has obtained experience and fully understands the foreclosure investing business.

Risky Sales

The success rate of buying foreclosures at auctions varies greatly and it’s imperative that the investor be well-educated about the state’s foreclosure laws and requirements to make a purchase. Most auctions are held on the courthouse steps on a pre-determined day of the month. Anyone who is interested in purchasing the property needs to have the funds available the same day and usually receives the property “as-is.”

Right of Redemption

Another factor to consider with auctioned foreclosure properties is the owner’s right of redemption. Each state/organization has a set amount of time that the owner has to “make the situation right.” For example, if back taxes are owed on the house, the IRS allows 120 days after the sale for the owner to pay the taxes and regain possession of their home. A local attorney can help you understand redemption laws in your state.

Steps to Prepare for an Auction

1. Verify the auction place and time. Homeowners are given a grace period prior to the auction to bring their mortgage current. This along with other reasons can cause auctions to be cancelled or delayed. You can contact the trustee or county clerk to verify the time as well as the location of the auction. They will have the most current knowledge of any cancellations or postponements.
2. Order a full title search on the property. This provides you with information regarding additional liens, unpaid taxes, construction debts, etc. that you will be responsible for after the purchase.
3. Research the property’s condition. Most homeowners have been struggling for at least a year financially before they give up and allow their home to go to foreclosure. This financial difficulty not only means they could not pay their mortgage, it also means they could not afford the maintenance and up-keep on their home. Try to find out as much information about repairs that may be needed, structural condition, etc.
4. Check out the area around the home and look for any issues with the land. This can include zoning issues, toxic waste issues, or other factors that place the home in a dangerous area and/or make it difficult to sell.
5. Gather information about estimated market value and any additional liens. With the help of your real estate agent and research, you can determine a realistic market value of the property which will help you decide on your maximum bid amount and determine if the opening bid amount is a bargain. Visit the county recorder’s office to find out how much is still owed on the property as well as any additional liens that may be attached to the home. While some liens may be removed from the property, others (such as tax liens) will have to be paid by the buyer after winning the auction.
6. Determine a maximum price you are willing to pay. There are several ways to determine a reasonable price for a property. Complete a comparative market analysis and use your previous research on the neighborhood and other nearby properties to determine how much the property may be worth. Be sure to add in the additional costs of repairs and updates to your figures. Use all of this information to determine what your maximum bid will be (so that you can still make a profit on the turnaround) and stick to it!
7. Arrange for financing. In most cases, buyers at auctions are required to provide payment for the property the same day. It is necessary for you to secure funds prior to attending the auction. There are several financing options available; choose which one works best for your situation.
8. Educate yourself on the state’s foreclosure laws and auction procedures. Find out what payment requirements apply to your state. Some states require the bidder to have the full payment available with a cashier’s check/cash, while others allow for a percentage to be paid the day of the auction. Information regarding the bidding process and requirements can be obtained through research, meeting with an attorney/lawyer or simply attending an auction to see how they work.
9. Make final preparations and attend the auction to place your bid. Contact the Trustee the day before the auction to ensure no changes have been made and make your final preparations for placing your bid. Arrive at the auction early to get yourself acquainted (if this is your first auction) and locate the auctioneer.
10. Place a bid. The auction process can be intimidating for new investors as they are often quick and action-filled events. This is where it helps to observe auctions prior to attending to place a bid. Observe other investors and follow their cues, but do not allow them to intimidate you. Some investors are experienced and frequently attend these auctions, but they are not always thrilled to see new competition.
11. Take possession of the property. If you are the winning bidder, get all the necessary documents from the auctioneer to show that you have won the property. The auctioneer and a real estate attorney can help you determine the next steps to take over the property. The time frame for this varies from state to state and can last from a few days to a month. Some properties also have a redemption period where the homeowner can pay the delinquent amount along with processing costs and regain possession of their home. If this is the case with your property, avoid making any changes to the property until the time has passed.
12. Eviction of occupants may be necessary. In some cases, the trustee will evict the residents. If you are responsible for this, contact a real estate attorney or the county sheriff to find out the procedures for your state/county.

Assume the Current Loan

This situation is a great way to fix two problems at once. By assuming the current loan you are 1) helping the seller by relieving them of their financial distress and avoiding foreclosure and 2) curing the default and taking over the payments without the normal delays and processing fees associated with a new mortgage. Veterans Affairs (VA) loans offer a flexible option that makes it easy for buyers to assume the seller’s current loan. If the property you are interested in is funded with a VA loan, be sure to explore this option.

Home Equity Loan

Home equity loans are excellent sources of financing for several reasons including purchasing a foreclosure. If you already own a home and have enough equity to get a loan, you can use that money to purchase the foreclosure. Be aware that sometimes lenders will charge a slightly higher interest rate for home equity loans or second mortgages, but the interest is tax deductible and the loan doesn’t have to be permanent. Once you own the foreclosure, you can always refinance at a lower rate if necessary, using the property as collateral.

Bank Loan

While some lenders shy away from financing foreclosure properties, others understand that new ownership requires new financing. When approaching a homeowner or institution with a proposal to purchase a foreclosure property, it is helpful to have a pre-approval letter in hand showing that you have the funds to back up your offer.

With a simple phone call or visit to the bank you can provide the necessary information and be pre-approved in just minutes. Having this letter in hand when you approach the sale is definitely a plus.

Investment Partners and Private Lenders

There are sometimes individuals or companies that have investment money but do not want to deal with all of the hassles of buying and selling properties. This is where you can join them and negotiate a percentage of the profit in return for their investing support. They fund the initial purchase of the foreclosure property. You manage the property and re-sell it for a profit. After the property is sold, you return the borrowed amount along with a percentage of the profit. If the right partnership is formed, this can be a win-win situation for everyone involved.

Cash Investors

Hard money loans can also be arranged from cash investors. These can be found several different ways. Look in the yellow pages for ads with these key words:

• all credit
• any credit
• we buy houses
• cash for houses

If you still can’t find any cash investors in your area, attend some auctions and talk to the bidders. Find out who they work with along with requirements and phone numbers. Follow-up with this information and you’ll have the financial backing that you need.

Online Resources

There are hundreds of websites that offer listing services for a monthly fee. Most of these also offer a free trial of 7-10 days. These listings are available for both national searches as well as regional searches. Below are some sites you may want to try. Use the trial period to find the best one for your situation or needs.

RealtyTrac.com

RealtyTrac offers a free 7-day trial to search for pre-foreclosure properties along with foreclosures, HUD, VA, notice of default and auction properties.

Foreclosure.com

Foreclosure.com is another site with a 7-day free trial available for searching REO, foreclosure, HUD, pre-foreclosure and bankruptcy listings.

Default Research

Provides pre-foreclosure listings accompanied with verified phone numbers.

ForeclosureFreeSearch.com

A nationwide database that offers a 7-day free trial for searching through foreclosure listings.

ForeclosureData.com

Search nationwide for pre-foreclosures, foreclosures, HUD homes, bankruptcies and for sale by owner (FSBO) homes.

ForeclosuresMass.com

A regional search service to locate pre-foreclosures in the Commonwealth of Massachusetts.

Chicago Foreclosure Report

This site offers regional listings for the Chicago/Cook County area.

Foreclosure Update of New York

Provides information on pre-foreclosures and upcoming auctions in New York City, Suffolk, Westchester and Nassau Counties.

Property Shark

Provides regional listings for 17 states including California, Ohio, Texas and Florida.

Individual Research

While there are plenty of properties available to be notified about, be aware that thousands of other investors are receiving the same notification. By conducting the research yourself, you may get a lead that has not been announced yet.

Public Records

The best way to get pre-foreclosure information before any national listings, is to research it yourself. Notices are recorded at the County Recorder’s Office with the County Clerk for each step of the foreclosure process. This information is public record and is available for anyone to review. Simply go to your county’s office and look through the records for Notice of Default (NOD), Notice of Sale (NOS) or Lis Pendens. While this method may be more time-consuming, it is the best way to find out about properties before others do - and it’s free!

Local Newspapers

All Notice of Sales (NOS) must be published in the newspaper as part of the foreclosure process. These listings of upcoming trustee sales are found in the Public Notice section. Search through business journals and local newspapers frequently to stay current on the status of local listings.

The key to making your investment processes smooth and reliable is a dependable agent. There are many sources you can use to find a quality real estate agent that can work with you to help obtain the best deals on foreclosure properties. Here are some key factors to consider along with steps to find an agent that you can develop a long-term investment relationship with.

Online Resources

There are many directories online to locate real estate agents who are looking to work with buyers. However, the quality of the sources varies greatly. As you are looking for an agent, do your research before making a commitment and consider the following factors:

• What real estate company do they work for? Is it successful, a top-rated company?
• Where is the office located? Try to find an agent who is near you if you are hoping to establish a long-term working relationship.
• How much experience do they have?- When working with foreclosures, a realtor who has experience negotiating these sales is a must.
• What do customer testimonials say? - These are wonderful tools for getting an honest, personal view of someone’s experience with this particular agent.

REALTORS®

Realtors® are individuals who have been licensed to sell properties and belong to the National Association of Realtors. These individuals have committed to follow a code of ethics and a higher level of performance. While there are many Realtors®, nearly half of all real estate agents are practicing independently. Be sure to ask when you are interviewing prospective candidates.

Open Houses

There are many advantages for investors when they attend open houses and meeting with agents is one of them. These functions offer excellent opportunities for you to talk with different real estate agents and get a better understanding of their work style and ethic. Watch how the agent works with prospective buyers.

• How do they interact with the sellers?
• What priority do they give to the property?
• Are they knowledgeable?
• How active are they in presenting the home?
• Are they eagerly pulling people in or are they standing and observing from the sidelines?

Referrals

The best way to get a good idea of how a real estate agent performs is by talking with some of their clients. Real estate agents who put customers first and ensure quality interactions have customers who are happy to talk about their experiences. Listen carefully when clients describe their experiences with their agent. Did the agent make the experience personal, or just treat the client as another sale? Was the agent knowledgeable and efficient? Did they go above and beyond the expectations?

You can also ask for referrals from other real estate agents. Foreclosures are a special category that not all agents are qualified to work with. If the agent you talk to is not experienced in foreclosures, ask them for a recommendation of someone who is. They will be able to identify the “best of the best” in their company.

Track Yard Signs

As you are going around neighborhoods to survey properties, take note of when signs are placed in yards and which agent is in charge of the property. When you see the property is sold, make note of that as well. You may see a pattern for certain agents. Some of them may clearly sell properties faster than others. This is a sign that the agent takes the extra time and initiative to spread the word about an available property and work with potential buyers to close a deal in a timely manner.

1. Gather the Necessary Paperwork

You will start by gathering both general paperwork as well as lender-specific paperwork to begin the short sale. As you are beginning the paperwork, keep in mind that this is not just an agreement between you and the lender or you and the seller. It’s a triad, with all three parties needing adequate representation. There are several forms that will require the signatures of both you and the current homeowners. These forms may include:

• Purchase and Sale Agreement
• Estimated Net Sheet to show how much each party will receive
• Letter of Hardship to show the homeowners cannot make the payments
• Financial Overview to show the expenses, income, assets, etc.
• Authorization Release Form to allow the lender to speak to you about the mortgage
• Any other forms required by the lender

If possible, have the homeowners accompany you on your trip to the lender so that signatures can be made and decisions can be figured out on the spot. It will save you plenty of legwork in the long run as well as keep everyone informed.

Many institutions will have a separate packet of information that will need to be completed. It is most efficient to obtain this packet prior to meeting with the homeowners so that all information can be compiled in one meeting.

2. Meet with the Loss Mitigation Department

After you have completed all the necessary paperwork with the homeowners, the next step is to start contacting the lender. Begin by contacting them and asking to speak with the loss mitigation department. If possible, ask for the name of the individual who handles short sales. Keep detailed records of each phone call as this process can be drawn out and it will be helpful to track the information you are given. Remember, you are trying to work out a deal with the institution, so be polite and patient at all times. If you do not develop a positive rapport with the staff, you may have no chance of the deal going through.

When you reach the individual in charge of short sales, introduce yourself and offer the following information:

• Identify the homeowners and their account number
• Identify yourself as the representative
• Ask for a fax number and fax the authorization to release information form so that the lender can speak to you about the mortgage. It is best to stay on the line while you fax the information so you won’t have to try and relocate this person.
• Tell them that you are interested in a short sale. Here is where your skill comes in as you begin to negotiate and convince the lender that this short sale is the best option for them.

3. Negotiate

As you begin to work with the lender, the most important factor is to BE PREPARED. These lenders have hundreds of files to work through and do not have time to find missing pieces or teach you the short sale process. Complete your research ahead of time so they see right from the start that you have done your research and are knowledgeable. This will give the impression that you will be easy to work with and less work for them may mean an easier negotiation for you.

As you are working with the lender, keep in mind these points:

• Determine ahead of time if you are going to reveal that you are an investor. There are mixed feelings about letting the lender know this upfront. If you choose to tell them, make it known in the first meeting so the standards are set.
• As an investor, let them know that you are knowledgeable about the process and while you are hoping to make a profit, you are also looking at their best interest in the situation.
• Identify selling points. How will the lender benefit from this arrangement? Will it avoid bankruptcy? Will they be able to recoup a large percentage of the mortgage? Will it avoid foreclosure? Use your skills to market these points to them.
• Keep in mind that a short sale can be a win-win situation for everyone. Your goal is to accurately portray that to the lender in a professional, clear manner.

The next step is for the lender to go through the paperwork, look at the mortgage terms and current rates, determine the value of the property, and hopefully find the amount that you negotiated appropriate. However, don’t expect it to happen too quickly.

Sample Short Sale Timeline

The short sale process can take time and effort for all parties involved. You may find that the lender takes extensive amounts of time to conduct these appraisals, or you may feel you are getting the “run-around.” Patience is key. Keep following up with the appropriate persons and follow through with any requests made of you. Here is a rough idea of what to expect as far as processing time is concerned:

Short sales occur when the mortgage balance is more than the value of the property. If the home were to be sold, the selling price would not be enough to pay off the mortgage. If the sellers are unable to pay the difference, the lender may, or may not, agree to accept less than the total amount. If the lender agrees to accept less, this results in the lender being shorted, hence the name short sale.

While these properties look appealing to many buyers because they think they are getting a deal on a home, it is not always the case. From the perspective of an investor - choose your properties wisely and consider the time and effort as compared to the possible profit before pursuing these properties.

The process for purchasing a short sale can be lengthy and not always productive. When you are interested in a short sale property, you will begin by making an offer to the seller. An agent will help you determine a reasonable offer. Once the offer is accepted by the sellers, it must then be approved by the bank. This can take a long time, up to six months, to receive a reply. Over 50% of the time, the reply is “No.” As an investor, this is a lot of time and energy that can be put into other properties you can purchase and resell in the time you negotiate one short sale.

However, if you feel short sales may be a viable option for you to explore, here are the steps you need to take to find those available in your area.

How to Locate Short Sale Listings

Unlike REO properties, there are no special listing agents for short sales. There aren’t even special listings in most cases to separate short sale properties from other properties on the MLS listings. Any real estate agent can list a short sale, but there may be information within the listing that tells the prospective buyer that this property is in the pre-foreclosure stages and/or is a short sale option.

Hidden Short Sale Clues

This can be more of a challenge as listings are not always labeled clearly that a short sale is available. This is due partly to the lenders wanting to keep it quiet so that the price of the home is not affected. There are however, several ways to identify short sale listings. As you are searching through possible listings, look for key phrases in the descriptions indicating that:

• bank approval is required
• property is in preforeclosure
• a Notice of Default has been issued
• time is needed for a response from bank
• the property is going to be auctioned

A real estate agent who is experienced in working with short sales will also be an asset in the search process. They will have knowledge of where to find these details and where to look for short sale labels if they are available. (Sometimes they can be found in the status modifiers.)

Once you locate a property that you are interested in, your agent will help you through the necessary procedures. An agent who is experienced in short sales is absolutely a necessity to help navigate the process in an efficient, productive manner.

An REO is a property that is ”real estate owned” by the mortgager. These properties begin as foreclosures, but unfortunately, the lack of equity in the home makes the price higher than the home’s value and no one bids on them when they go to auction. When there are no bids placed on the property, as often happens, they become property of the mortgage company. 

When individuals go to purchase a home in foreclosure at auction there are many variables that the buyer needs to watch out for. The minimum bid price usually includes the mortgage balance, any additional interest that has accrued, plus foreclosure legal and process fees. The buyer must have a cashier’s check ready on the day of the auction for the entire amount of the bid. The house is then sold “as-is” which includes any additional liens, the current condition of the home along with possibly existing tenants. When buying a home in this manner, the buyer has to conduct a large amount of research to insure they are getting a good deal.

When the property does not sell at auction and becomes an REO, the situation changes. At this point, the property is under the ownership of the mortgage company and the original loan no longer exists. The mortgage company will evict any tenants and may even complete necessary repairs to the home. They will also negotiate with the IRS to remove any tax liens that are on the property.

How to Purchase Bank Owned Homes

Each bank or mortgage company will have their own guidelines for selling real estate owned (REO) properties they have acquired after a foreclosure property goes to auction but does not sell. Though it may seem as though these properties are priced too high to make investing a reasonable option, that is not always the case. There are two situations that may prove these properties to be quite valuable:

1. The bank originally auctions off foreclosed homes at a price that will cover the amount that is still owed on the mortgage. If this price does not sell, the bank or lending company may lower their price and/or accept a lower bid to get rid of the property. The sooner they can find another source to cover the money they have lost, the better it is for their company. As you are looking at homes, be sure to see how long they have been sitting with the bank; properties that have not sold for the bank for many months may offer a better deal.
2. If additional loans were taken on the home such as a second mortgage, a sweet deal can quickly be soured. However if the lender of the additional loans does not file for foreclosure and complete the process, they are released from the home with the foreclosure. This means good news for a potential buyer as these loans can be up to one-fifth of the market value of the home. If that extra cost is expelled, you may be able to find a beautiful home for a reasonable price - and make a quick profit on the turnaround.

Make the Right Contacts

Begin by contacting the bank or mortgage company that owns the property to find out their specific process for collecting offers on available properties. When there are a large number of foreclosures on the market, most companies have a separate department dedicated specifically to this purpose.

Learn All You Can About the Property

Now it’s time to do your research. There are several questions you will need to have answered prior to placing an offer. You can either contact the listing agent yourself or have your agent contact them. Use this list of questions as a starting point for your research:

• Is the property being sold “as is”? Is there a special “as is” form?
• Has the bank agreed to perform any work on the property?
• What inspection reports are available for review prior to making an offer?
• What is the time frame for acceptance after an offer is made?
• Where should the offer be delivered? Is there a specific office/individual?

Make an Offer

There are many advertisements showing banks “giving away” properties for extremely low prices. In reality, most of these properties are priced close to full market value. The mortgage companies are trying to recoup lost money and need to attempt to get as much for the property as possible. Be prepared for the banks to send a counter offer after your submission. This is their way of ensuring they are receiving the most they can for the property. Plan to send a counter to their counter-offer.

After the offers are submitted, it may take some time, depending on the company, to receive a response. Many of these banks are dealing with large numbers of properties and several individuals have to review the offer before a final decision can be made.

You may need to have sufficient funds available to cover the cost of the mortgage, as some banks will not finance REO properties.

Conditions of REO Properties

The condition of the home can make or break a deal. Most mortgage companies will want to sell the property as is. They do not want to invest additional monies into a property that has already caused them to lose financially. They are required to report any known problems, but you may want to take matters into your own hands and have the property thoroughly inspected. This allows for fewer surprises and headaches after you have completed the sale.

If you want the bank to cover repairs or inspections, you will need to make it clear in your offer and be prepared to negotiate. The acceptance rate for these additional coverages varies depending on how long the property has been on the market, the amount of the loan and/or the number of offers received. Some mortgage companies may negotiate the inspections or offer a credit to keep from having to place the property back on the market.

As we see the mortgage crisis continue, the number of foreclosures on the market continues to rise. In the release of September 2008 RealtyTrac’s U.S. Foreclosure Market Report, there was a decrease of 12 percent from the previous month but still a 21 percent increase from this time last year. A large reason for this decrease is the changes in state laws that are slowing the rate at which lenders can go forth with foreclosures. While the impact of new state laws are starting to take effect, there are still an alarming number of homes in pre-foreclosure or already foreclosed. Below are the top states for the highest and lowest total number of foreclosures, as well as the rates of foreclosure.

States with Highest Foreclosure Totals

The following states have the highest number of foreclosures:

1. California (69,548 properties)
2. Florida (47,956 properties)
3. Nevada (13,022 properties)
4. Arizona (12,982 properties)
5. Ohio (11,470 properties)

These states are followed by Michigan, Georgia, Texas, New Jersey and Virginia.

Top States for Highest Foreclosure Rates

1. Nevada (1 out of every 82 homes)
2. Florida (1 out of every 178 homes)
3. California (1 out of every 189 homes)
4. Arizona (1 out of every 201 homes)
5. Georgia (1 out of every 417 homes)

These states are followed by Michigan, Ohio, New Jersey, Indiana and Colorado.

States With the Lowest Foreclosure Totals

1. Vermont (6 properties)
2. North Dakota (36 properties)
3. Nebraska (38 properties)
4. Montana (42 properties)
5. South Dakota (51 properties)

States With the Lowest Foreclosure Rates

1. Vermont (1 out of every 51,593 homes)
2. Nebraska (1 out of every 20,391 homes)
3. West Virginia (1 out of every 13,504 homes)
4. Montana (1 out of every 10,286 homes)
5. North Dakota (1 out of every 8,550 homes)

Source: Realty Trac

Know the Value of Your Property

In order to make a profit in the end, you need to know how much money you can expect that property to sell for when you put it on the market. You will need to check prices on other local properties that compare in size and structure, estimate the costs for repairs, and be able to determine a successful sale price. If you can’t figure out how much the property is going to be worth, it will be virtually impossible to determine if it’s a good deal until it’s too late.

Research the Law

Each state has their own foreclosure laws that you must abide by. It would be a real shame to make a fantastic purchase, fix a house up and sell it, only to find that you have put together a deal that is illegal in that state. Check out our page on State Foreclosure Laws to get started, and be sure to contact an attorney when you are ready to set up your own deal.

Check Your Finances

You will need to be sure you have enough money to back up your purchase. If you don’t have enough money, you will need to find a way to get some, and quickly. It’s said that you should never pass up a deal because of money, if it’s a good deal, there will be interested investors. If no one is interested, it’s probably not a great deal.

Look Beyond the Obvious

There are many hidden factors that break a deal quickly for investors: descriptions that aren’t accurate, additional liens that weren’t researched, unpaid taxes, and the list goes on. Do your homework and cover all of your bases and then some. Research, research, research - it’s crucial to find out everything involved with the property to be sure you are getting a great deal and not purchasing a load of hurdles and headaches.