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6 tips for buying foreclosures right

The foreclosures are creating tremendous opportunities, but how do you buy right? Here are 6 tips for buying foreclosures.

  1. Use cash or get pre-approval from the lender you are buying from – Cash is king. Many banks will take a cash offer before they even consider a financed offer. If you are getting a loan, get pre-approved from the lender you are buying from.
  2. Don’t get caught up in bidding wars – Competition will bid up the price, do not get caught paying too much in a bidding war. Stick to your criteria.
  3. Evaluate lots of deals – Some fall in love with one deal and do whatever they can to make it work. It is highly recommended to fall in love with having tons of great deals to evaluate and purchasing the best ones. Make sure to always have great deals in your pipeline.
  4. Contact the lender directly – Creating relationships with asset managers can give you an inside track on short sales or if the bank takes the property back it can result is a deal without other bidders.
  5. Target fixers – Move in ready homes will have more competition, targeting fixers will allow you to buy at large discounts and add value through rehab. Make sure you have a contractor look at it, do your inspections and due diligence.
  6. Talk to the listing agent – Build relationships with REO listing agents who can feed you many deals.
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29 Responses to 6 tips for buying foreclosures right

  1. Chris Self says:

    A listing agent disclosing other offers to a buyer is a breach of fiduciary trust. These agents should be repremanded. Also, paying an agent outside of escrow is a RESPA violation and can result in prison time. Just some details to consider…

  2. Ryan Moeller says:

    I’m glad you mention that Chris, but I still see it happen all the time. I have lost many highest and best bids and then I come to find out that the listing agent represents the buyer as well. This has happened way too many times for it to be coincidence and as an investor it would be nice to have a legal and ethical solution. What do you recommend?

  3. Carol Ferguson says:

    Ryan,
    There are reason why rules, laws and ethics are in place, and are being revised. I strongly sugest reading, reviewing any Real Estate Commission website. It’s free and many laws are available for reading-including State Law.

    Also, you may want to hire a real estate attorney, which may keep you out of prison-where you will find many, with more coming to serve time, suggesting your behavior.

  4. Kevin says:

    Easy recommendation: DO NOT WORK WITH AGENTS! Realtors are in the RETAIL BIZ…if you’re buying through them, you’re already paying 6% too much. Sell through them if you wish but do not buy. If it’s such a great deal, why would they not pocket their own listing or self-provide to another? Ryan – Rule #1 in buying foreclosures should be this one…

  5. carl bailey says:

    You can use faniemay.com,homesteps.com. Then bid 30 to 50 percent off. Carl_7755@yahoo.com . Carl bailey

  6. John says:

    Ryan, I am interested in learning about foreclosed properties in my area, Massachusetts. Any websites, books, etc that would be good source for the novice? John

  7. Steve Nordberg says:

    Gentlemen: A listing agent who soley represents the seller has the goal to sell the property for the most money. If he feels he can achieve this by revealing what buyers are offering and he treats all buyers equally; then this is an acceptable practice.

  8. Ryan Moeller says:

    Carol, I am not an agent so it is not my behavior. I am an investor who is being screwed by from what you and Chris are telling me are unethical agents. They are tipping their clients to get double commissions. When I repeatedly get outbid by a very small amount and the listing agent also represents the buyer it just seems fishy. Do you agree? Have you ever seen this?

  9. Ryan Moeller says:

    Great recommendation Kevin. Likewise, great advice Carl. Thanks guys!

  10. Ryan Moeller says:

    John, I recommend taking advantage of the advice and tips in this blog. I wrote some articles on 10 tips for beginners, 3 most influential books and also offer free mentoring. Most important, I recommend you focus all of your time on one strategy and become a master at that strategy.

  11. Steve barry says:

    I couldn’t agree with you more Ryan. I have also been screwed on several deals by agents who refuse to present my bids to the bank because they don’t want to split commissions. I offered $465,000 on one property that they tried to sell for $585,000 .. this may seem low, but the property stayed vacant and then sold 11 months later for $404,000 to someone who was a “friend” of the listing agents. The banks need to wake up and get a better handle on who they dump these listings to. If you’ll notice, the agents with a bunch or REO’s are usually slime… (not always, but quite prevelant)

  12. Ron Walraven says:

    listing agents cannot represent buyers. Agency laws forbid it–not to mention how can you have a fiduciary duty to the a buyer and seller in the same transaction? What your saying is true on how they conduct themselves–but not ethical

  13. Beney says:

    I’d like to offer an alternate paradigm:

    It’s common to think that agents looking for double commissions are looking after their own interests at the expense of the buyer and/or seller.

    On the other hand, if you need to delegate some of your property-related work to someone, who better to partner with than an active agent? If you offer the opportunity to earn two commissions – by participating in two separate transactions (i.e., a “flip”) – you might even earn their loyalty so long as you treat them fairly and help them achieve a more steady income in an otherwise phlegmatic and unpredictable market.

    There’s nothing wrong with “leaving some profit for the next guy.” Greed is what got us into this economic maelstrom. Co-operation ultimately will prove more profitable in the long run. If you can get the agents to do some of the legwork, you can become a “manager” instead of a “laborer” in your investing endeavors. Offer honest pay for honest effort, and you’ll do better overall, even if you do still find a “bad apple” here and there. You alone can only do so much. Delegate to paid assistants (agents on commission) and you multiply yourself, you get more transactions closed, and you make more profit – meaning that your agent-delegates make more commission, so they bring you more business and do more of your legwork for you.

    In the IT world, this is known as “virtualization”.

    Outside of this forum, you’d pay anywhere from $497 to $1497 or more for this kind of information.

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  23. Ryan Moeller says:

    Thanks, I’m glad you find it useful. I also write weekly for BiggerPockets official blog as well.

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  26. Ryan Moeller says:

    Thanks Noni,

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  27. Ryan Moeller says:

    Thanks so much, I enjoy writing and helping others.

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  29. Ryan Moeller says:

    Thanks Chantay, I greatly appreciate it. Best of luck!

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