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Important Points to Consider when Buying Pre-Foreclosures
By
Jul 28, 2005, 14:17
There are two very important points that you should keep in mind when buying
pre-foreclosures properties.
1. All of the debt on the property remains on the property, until it
is sold at auction.
2. Only those individuals who are on the title to the property can sell
the property.
These points may appear to be obvious, but you would be surprised how many investors
"forget" these points and end up missing out on a deal. What's worse is
that investors who put up their money before checking these points could end up losing
some or all of their invested capital. Don't let these careless mistakes happen to
you. Remember that you are in the business of making money not losing it.
Point #1. You must verify all of the debts that have been recorded
against the property. This includes mortgages or deeds of trusts, property tax
liens, mechanics' liens, IRS liens, and judgments (see the article on Junior Liens). Contact the owners of the
property that is of interest to you, and ask them about the debts on the property.
They may or may not tell you of every property debt, so you should verify the information
with the foreclosure attorney. Foreclosure attorneys have to do title searches for
every property they plan to sell at auction, and they will put the results of the searches
in their files. If your prefer, you can do your own title search by going to the
county's land records department and asking the staff to help you. Once you have
identified all of the recorded debt, do your analysis to see if it makes sense to buy the
property before the auction. If there are significant junior debts, you may want to
wait until the auction to buy the property. It's possible that some of the junior
debts could be wiped out, and you could end up with a great deal.
Point #2. You must identify all of the property owners and determine
whether they are all willing to sell the property before you waste a lot of effort.
The majority of property owners will be straightforward about who else is on the title to
the property. However, there may be owners who are not completely candid about this
information. These property owners could include estranged spouses who may not care,
antagonistic family members who may be arguing about ownership rights, and out of town
relatives who may prefer not to be involved. These are some of the realities that
could affect your buying decision, and should justify why you need to determine who all of
the owners are. Again, ask the foreclosing attorney or do your own title search to
verify this information. It would be very unpleasant for you spent a lot of time and
money negotiating a great deal, only to find out that all the owners have not signed or
will not sign the contract. Without the signatures of all owners the contract is null and
void.
Pay attention to these two points every time you invest in pre-foreclosures.
Don't get careless and don't make the mistakes that many investors continue to make.
Always verify the total number of debts and the total number of owners before committing
your time and money.
Source: teamforeclosure.com
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