Dave Says: Buying a Foreclosure

Buy a foreclosure bargain?

Dear Dave,

I want to buy a foreclosure. How do I go about it, and where do I look? I’m having a hard time making anything happen because it seems like the real estate brokers are buying them up before I know they’re available or have a chance to look at them.

– Jeff

Dear Jeff,

I used to buy and sell foreclosures for a living, and for a while, I ran into the same trouble you’re having now. It didn’t take long for me to realize that you need to be the first one to talk to the person who’s suffering the foreclosure. It can almost be a first-come, first-served situation, and you need to beat a path to the person’s door in a hurry if you want a chance to make a deal!

Another problem I noticed was that a lot of the people who were being foreclosed on owed lots more on the house than I was ever willing to pay. Plus, it’s really tough to get a short sale worked out in the two or three weeks before the foreclosure actually occurs. So, I started looking for houses that had some decent equity in them. I’d leave it alone if the house was worth $110,000 and there was still $100,000 owed. But if you’ve got a situation where they owe $100,000 and it’s worth $300,000, then we’ve got something to talk about!  

Once you find some good possibilities, cut them out of the local newspaper or legal publication, then go to the courthouse and look up how much each one of them owed. That culls about 90 percent of them. After that, I’d just drive over and talk to the 10 percent that are left. I found lots of good deals just talking to the owner before the foreclosure sale took place!
 

– Dave