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Buyincomeproperties.com
Wholesale Real Estate From The Banks And Other Lenders Part II
By IncomeProperties
Nov 23, 2005, 14:17
THE BEST DEALS IN REO
Unusual properties can be very profitable for the REO investor. From time to time, the Small Business Administration (SBA) will have a foreclosure. Such properties were originally used as security for loans to start businesses. Should the business fail, the SBA will have an REO (foreclosed home) on its hands. The properties may be located in better than average areas, so pursue this source and stay on the mailing list.
For investors who are knowledgeable about farming operations, Farmer’s Home Administration has many foreclosures and REO. Find the local FHA office in the telephone book and call to request that your name be entered on the mailing list. These properties are special in that the new buyer must know either how to sell the property quickly or how to produce revenue to meet the mortgage payment. There is a tremendous amount of agricultural and forest land available to buyers of distressed property, but it is no business for a neophyte.
The best deals in the REO market can be expected on properties that are foreclosed upon by out-of-state investors. Many property owners find themselves unable to collect mortgage payments owed to them after they have moved to another state to retire or to work. These sellers are eager to seel their property or to lease it. T is difficult for the out-of-state owner to look after such an asset from a distance, and the property usually deteriorates rapidly.
Many alert REO investors make good deals quickly in their market. The out-of-state investor or owner may also be less knowledgeable about values or may just need the steady income that a new investor can provide. An additional benefit is the financing that sellers can provide. By financing the REO, the seller can assure the new buyer a quick deal with little competition.
IRS-FORCED SALES: BIG BUCKS FOR THE SAVVY IVNESTOR
One profitable strategy for buying bargain properties is to purchase distressed or foreclosure property from the IRS. The property isn’t necessarily distressed or damaged – however, the owner usually is. Distressed owner have liens filed against them and their assets (homes) and until their obligations are paid, they can in many cased be foreclosed upon. The statutes of the different states also apply, so you must research the rules for your state.
Who can foreclose or repossess property, you might ask? The IRS is a federal agency and has been granted a great deal of power. If a taxpayer does not pay taxes when due, the IRS will assess the delinquent tax and make a request for payment. If the taxpayer fails or refuses to pay, the IRS will then place liens on the personal and real property. The IRS will file (record) a Notice of Federal Tax Lien with the county recorder. This document will be recorded against all the assets of the individual or the corporation in the county where the real property is located.
After the lien has been recorded against the property, the IRS can seize and sell the property. The IRS will give the homeowner notice of the lien and also a notice of intent to seize. At this point, things get sticky for the homeowner / delinquent taxpayer. The revenue officer has great powers granted by the federal government to take many actions. The revenue officer will determine a quick sale price for the property. This may or may not produce enough revenue to completely clear the debt to the IRS.
When the sale takes place, the IRS will sell the property subject to the existing liens and mortgages that have priority to its attachment. The bidder at the auction should keep in mind that they are purchasing a property “as is” and subject to the liens that were recorded prior to the IRS Notice of Federal Tax Lien.
The IRS office or revenue agent is not required to advertise the sale of the property in any specific manner. This is different from the situation that applies with Sheriff’s Sales and Trustee’s Sales of real estate. Therefore, a relatively small group of investors follows the IRS Sales. This lack of publicity opens a window of opportunity for those who develop the knowledge of the sales process and the methods to track the sales.
The question in most investors’ minds is: How do I locate these forced distressed sales? The answer lies in the Internal Revenue Code, which requires that a notice of sale be published at least once in a newspaper of general circulation published in the county where the property is located. If there is no newspaper of general circulation, the revenue officer is required to post notice at the post office and at least two other places. This notice must be posted at least 10 days before the sale. How do you find which paper is the paper of general circulation? That’s a good question. If you live in a major metropolitan area, expect there to be numerous papers, perhaps as many as 10. The local library is a good place to research the newspaper.
State County Tax Sales General Information
The date and time of sales usually differ from one county to another within a state. While auction hours usually are scheduled during the course of the business day, many sales are completed before noon. As a buyer, you should expect many of the owners to pay their delinquent taxes between the time of the last published listing and the day of the sale. An up-to-date auction list of parcels for sale is published on a regular basis. Generally, the list of parcels being auctioned that day is provided a few hours prior to the sale. If you intend to bid, you should find this list well worth the price you may have to pay for it, although it is often free.
WHAT INFORMATION DO YOU NEED?
You need the same information that is needed by lawyers, sheriffs, county clerks, and tax collectors. This information is not a mystery, nor is it intentionally withheld from the public, but it is something most people are unaware of. This information is available to the public every working day in teh public records.
It is paramount that property owners, bidders, and purchasers both search the county records and ask the county staff members to obtain information about the sale. You can bid effectively only if you know whether there is a redemption burdened by liens or has other legal problems. The answers to all these questions are in the public records of the county where the sale is conducted.
REDEMPTION RIGHTS AND OTHER REGULATIONS
In states that have redemption periods, tax sales are not an outright sale of the real property. They may instead take the form of a sale of the lien for the unpaid taxes and charges. A little research will tell you whether this is the case in your state. In addition, many states protect the owner’s rights when the owner is serving in the armed forces.
Regulations may vary from state to state and among counties in states. For example, some states keep the excess amount of the bids. Others pass this money on to the seller or delinquent taxpayer. Laws are constantly being amended in state legislatures and other bodies. Plan on taking the time to get to know the laws in your particular state.
Lenders at auctions are high bidders the majority of the time. The cash requirements at the sale / auctions make the sale out of bounds for all but the most serious investors and bargain hunters.
There are many ways to track down lender-owned REO. Here are a few of them.
The Yellow Pages: Call every mortgage lender. Keep in mind that they won’t tell you they have an inventory of foreclosure properties. Mail to lenders. Your state banking or savings and loan office will have the addresses. Be prepared to do numerous mailings in a short period of time to prove you are a serious investor / buyer.
Visit bank branches in your community and find the person who handles either foreclosures or repossessed property.
Follow the property after the Trustee’s / Sheriff’s Sale. Many of the properties will be owned by out-of-state lenders. This could be a benefit to you in your negotiations.
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