How To Buy Property at the Courthouse Steps: Acquisition Basics for the Real Estate Investor
Buying a house or property at the courthouse steps is a way to describe an investor buying property at auction, normally held at your county courthouse. Generally speaking, these are going to be foreclosed or bank owned homes, so it will demand finding some good sources of information and doing your research ahead of time. The payoff is finding property that is deeply discounted and can turn into an excellent investment. Here are a number of considerations before jumping into this type of property investing.
The Basic Foreclosure Process:
Foreclosure is a multiple step process, which begins with the mortgage going into default (this is also called the ‘pre-forclosure’ period). The lender will begin the legal process including filing paperwork and a notice of intent to foreclose with the court. They will also normally be required to place an announcement in a local paper.
After these requirements have been met, the lender can go ahead and foreclose on the property, putting it up for sale at a public auction. These auctions are normally held at specified days of each month and they aren’t always well attended so it could be a great opportunity to grab a property very cheaply. However, the bank or lender could also specify a reserve (minimum) price.
In some cases, your state law might allow the lender to offer the property to certain first-time homebuyers before the property goes to auction. If an offer is accepted, then it will be pulled from the auction docket. To actually make a bid or offer, you will need to bring certified funds as required by the court.
Foreclosure & TARP Funds Legislation:
The original intent of the TARP program, as part of the financial industry bailout after the 2008 economic recession, was to provide banks with funds that could be used to help out struggling homeowners. Unfortunately, this legislation has been estimated to have only actually helped to prevent less than half of the original estimates of foreclosures. This seems to have had the effect of encouraging banks to continue making riskier loans than perhaps should be made.
Dealing With Insider Circles:
When you are looking to buy property in foreclosure at the courthouse steps, one of the biggest obstacles might be actually finding out what is available. Many would-be foreclosure and pre-foreclosure investors end up fighting a losing battle, seeing their potential target properties going off the market before they reach the auction.
The reason for this is due to the fact that there are insider circles. In other words, people are somehow connected to the banks, and other lenders, getting a head’s up on these properties in advance, and then picking off the good ones. If you find yourself in this situation, you could perhaps try to find and connect with another insider group or network.
Crushing the Competition:
You will have competition when trying to buy property at the courthouse steps or even before, during the pre-foreclosure process. In addition to insider circles mentioned above, there will be other investors who show up at the courthouse, ready to bid and grab some quality properties for very low money. The first way to really beat your competition is to do better research. Search out the properties and do a full evaluation as far as pricing and condition; due diligence is a must.
Use a great database system such as Find Motivated Sellers Now, which lists properties that are vacant. Homeowners in trouble often abandon the property before it even goes into pre-foreclosure. In other cases, the database identifies vacant homes with out of town owners; these homes sometimes end up going into foreclosure because the owner simply can’t keep up the payments along with his or her cost of living elsewhere. Either way, vacant homeowners are often very motivated to sell.
The Bottom Line:
Buying foreclosed properties, whether on the courthouse steps or well ahead of that point, can be a great way to build up your real estate investment portfolio. As you now know, there are a number of ways to go about this, but they really all boil down to doing excellent research and identifying distressed properties as early in the process as possible.