Table of Contents

Introduction 1

About This Book 2

Conventions Used in This Book 2

What You’re Not to Read 3

Foolish Assumptions 3

How This Book is Organized 5

Part I: Prepping Yourself for Foreclosure Success 5

Part II: Laying the Groundwork for Maximized Profit and Minimized Risk 5

Part III: Creating Win-Win Situations in Pre-Foreclosure (Prior to Auction) 6

Part IV: Finding and Buying Foreclosure and Bankruptcy Properties 6

Part V: Cashing Out Your Profit . . . after the Sale 6

Part VI: The Part of Tens 6

Icons Used in This Book 7

Where to Go from Here 7

Part I: Prepping Yourself for Foreclosure Success 9

Chapter 1: Wrapping Your Brain around Foreclosure Investing 11

Investigating the Foreclosure Process from Start to Finish 12

Picking Your Point of Entry 13

Scooping other investors during the pre-auction stage 14

Bidding on properties at foreclosure auctions 15

Buying properties after the sale 16

Assembling a Team of Experts and Advisors 17

Getting Your Financial Ducks in a Row 18

Doing a Little Detective Work 19

Finding foreclosures and seized properties 20

Investigating the property’s title and other documentation 21

Inspecting the property with your own eyes 22

Guesstimating a property’s true value 22

Investigating the situation and the homeowners 23

Setting and Sticking To Your Maximum Bid 24

Taking Possession of the Property 24

Completing the essential paperwork 25

Paying property taxes and insurance 25

Convincing the current residents to move on 26

Cashing Out: Realizing Your Profit 26

Repairing and renovating the property to maximize its value 27

Marketing and selling to get top dollar 27

Cashing out equity by refinancing 28

Profiting in other ways 28

Chapter 2: Getting Up to Speed on the Foreclosure Process 29

Identifying the Foreclosure Process in Your Area 30

Foreclosure by trustee sale 30

Foreclosure by judicial sale 30

Exploring the Missed-Payment Notice Stage 31

Getting Serious: The Notice of Default 31

Proceeding to the Foreclosure Sale 32

Halting the Foreclosure Process 33

Reinstating the mortgage 33

Requesting and receiving a forbearance 33

Mortgage modification or repayment plan 34

Filing for bankruptcy 35

Agreeing to a “deed in lieu of foreclosure” 35

Getting one last chance during the redemption period 36

Finalizing the Foreclosure: Ushering the Previous Owners Out the Door 38

Chapter 3: Picking Your Point of Entry in the Foreclosure Process 39

Dipping In at the Pre-Auction Stage 40

Exploring the pros and cons of pre-auction foreclosures 40

Guiding homeowners to good decisions 41

Dealing with anger and angst 42

Assessing your ability to deal with pre-auction scenarios 43

Pursuing Foreclosure Notices 44

Knowing the benefits of waiting for the foreclosure notice 44

Weighing the drawbacks of waiting for the foreclosure notice 45

Wrapping up your deal before the sale 46

Bidding for a Property at a Foreclosure Auction 46

Weighing the pros and cons of buying at auctions 48

Setting a maximum bid well in advance 49

Putting on your poker face 49

Acquiring Properties after the Auction 50

Scoping out REO properties 50

Finding and buying government properties 51

Buying properties from other investors 52

Waiting Out the Redemption Period — If Necessary 52

Part II: Laying the Groundwork for Maximized Profit and Minimized Risk 55

Chapter 4: Building a Powerful Foreclosure Investment Team 57

Lawyering Up with a Real Estate Attorney 58

Teaming Up with a Good Moneyman — or Woman 59

Consulting a Title Company to Cover Your Back 60

Hiring a Tax-Savvy Accountant62

Lining Up a Home Inspector 63

Contacting Contractors and Subcontractors 64

Hiring a general contractor — or not 65

Tracking down top-notch contractors and subcontractors 66

Contracting with contractors and subcontractors 66

Finding a handyman and other helpers 68

Insuring your helping hands 68

Selling Your Property for Top Dollar through a Seller’s Agent 68

Recognizing the value of a seller’s agent 69

Picking an agent with the right stuff 70

Assessing the Pros and Cons of Partnerships 71

Chapter 5: Filling Your Foreclosure Tank with Financial Fuel 73

Estimating Your Cash Needs 74

Finding a Cash Stash: Knowing Your Financing Options 75

Borrowing Against the House You’re Buying 77

Shaking Your Piggybank: Tapping Your Own Resources 79

Examining the pros and cons of using your own money 80

Totaling your sources of investment capital 80

Planning for contingencies 83

Financing Your Venture with Conventional Loans 83

Making yourself look good on paper 84

Gathering the paperwork and records you need 87

Comparison Shopping for Low-Cost Loans 87

Chapter 6: Networking Your Way to Foreclosure Success 89

Grasping the Power of Networking 89

Generating leads on profitable pre-auction properties 90

Securing your financing 91

Tracking down reliable, affordable professionals 92

Selling your house for more money in less time 92

Realizing the Importance of Being Good 93

Acting with integrity — always 93

Investing in quality craftsmanship 94

Building thriving communities 94

Marketing Yourself 95

Gathering your marketing tools 95

Starting with your inner circle 97

Keeping in touch . . . a daily chore 97

Managing Contact Information 98

Rewarding Good Deeds and Good Leads 99

Part III: Creating Win-Win Situations in Pre-Foreclosure (Prior to Auction) 101

Chapter 7: Discovering Homeowners Facing Foreclosure 103

Networking Your Way to Promising Properties 104

Identifying your personal lead generators 104

Getting the word out on the streets 107

Scoping Out the Neighborhood for Dontwanners 108

Searching for FSBO Properties 108

Finding Foreclosure Notices 109

Tracking down local publications 110

Getting on the mailing list 110

Subscribing to commercial foreclosure information services . . . or not 111

Deciphering a foreclosure notice 111

Chapter 8: Building a Property Dossier 113

Collecting Essential Information about the Property 114

Honing your title acquisition and reading skills 114

Picking details off the foreclosure notice 116

Digging up details at the register of deeds office 121

Gathering tax information at the assessor’s office 126

Getting your hands on the property worksheet 126

Gathering additional information 127

Doing Your Fieldwork: Inspecting the Property 128

Doing a drive-by, walk-around inspection 128

Snapping some photos 130

Assembling Your Dossier: A Checklist 131

Chapter 9: Contacting the Homeowners and Lenders 133

Scheduling Your Foreclosure Activities 134

Contacting the Homeowners Directly 137

Tracking down the homeowners 137

Kicking off your mail campaign 138

Getting in touch over the phone 144

Adding the Homeowners’ Profile to Your Property Dossier 147

Laying Out All Available Options 147

Reinstating the loan 149

Negotiating with the lenders for a forbearance 150

Refinancing the mortgage 151

Listing the property 151

Selling short 152

Accepting your cash offer 152

Refinancing through you 152

Leasing the property after selling it 153

Selling the home and renting it back 153

Giving a deed in lieu of foreclosure 154

Filing for bankruptcy 155

Waiting (and saving) during redemption 155

Doing nothing 155

Getting Inside to Take a Look Around 156

Contacting the Lenders 156

Contacting the senior lien holder 158

Contacting the junior lien holders 158

Chapter 10: Analyzing the Deal and Presenting Your Offer 161

Completing the Deal Analysis Worksheet 161

Calculating the homeowners’ equity in the property 162

Calculating your top cash offer 165

Logging the loan status 166

Determining options based on LTV (loan-to-value) 166

Assessing the homeowners’ credit health 167

Gauging the homeowners’ wants 168

Determining the homeowners’ gross monthly income 168

Assessing the Homeowners’ Options 168

Presenting Your Offer: The Purchase Agreement 170

Closing Time 172

Part IV: Finding and Buying Foreclosure and Bankruptcy Properties 175

Chapter 11: Bidding for Properties at a Foreclosure Sale 177

Tracking Down Auction Dates, Times, and Places 178

Preparing Your Maximum Bid 179

Guesstimating the property’s improved value 180

Estimating repair and renovation costs 180

Figuring in holding costs 180

Subtracting agent commissions and closing costs 181

Arriving at your maximum bid amount 182

Bidding at a Foreclosure Auction 184

Packing for an auction 185

Sitting in on a few auctions 186

Crafting a winning bidding strategy 186

Submitting sealed bids 187

Following Up . . . After the Auction 188

Chapter 12: Buying Repos: Bank Foreclosures and REO Properties 193

Acknowledging the Drawbacks of REO Opportunities 194

Getting Up to Speed on the REO Process 195

Shaking the Bushes for REO Properties 196

Positioning yourself as an attractive investor 196

Hooking up with REO brokers 196

Getting connected with REO A-listers 197

Tracking the property through the REO stage 200

Working your way to the better deals 200

Following up with homeowners during redemption 201

Inspecting the Property 201

Timing Your Offer for Optimum Results 202

Acting quickly after the auction 203

Timing your move with the redemption period 203

Tuning in to the lender’s fiscal calendar 204

Waiting for the broker to list the house 205

Pitching an Attractive Offer 205

Sizing up the lender’s needs 205

Re-evaluating your needs 206

Drawing up an offer in writing 207

Closing on the deal 209

Chapter 13: Finding and Buying Government Repos 211

Bargain Hunting for HUD (Housing and Urban Development) Homes 212

Weighing the pros and cons of HUD homes 213

Hooking up with a HUD-approved agent 213

Finding HUD homes online 214

Finding and Buying VA Repos 215

Profiting from Fannie Mae and Freddie Mac Properties 216

Tapping into Freddie Mac’s home clearinghouse 217

Shopping for Fannie Mae properties 218

Buying FDIC properties 219

Finding and Buying Government-Seized Properties 219

Buying properties at tax sales 220

Avoiding the tax lien sales gurus 220

Buying properties from the IRS 221

Contacting your county treasurer’s office 222

Taking a trip to the department of transportation 222

Finding government-seized property online 223

Chapter 14: Banking on Bankruptcies 225

Brushing Up on Bankruptcy Laws 226

Selling assets through Chapter 7 bankruptcy 226

Restructuring debt through Chapter 13 bankruptcy226

Knowing When to Purchase 227

Tracking Down Houses in Bankruptcy 229

Skimming publications for bankruptcy notices 229

Researching bankruptcy filings 230

Networking with the gatekeepers 230

Dealing with the Gatekeepers 232

Cooperating with bankruptcy trustees 232

Teaming up with bankruptcy attorneys 232

Getting the homeowners on your side 233

Getting the creditors on your side 233

Dealing with Bankruptcy Delays on a House You Bought 234

Chapter 15: Sampling Some Other Foreclosure Strategies 237

Negotiating Short Sales 237

Knowing the lien holder pecking order 238

Wheeling and dealing with lien holders 240

Recognizing a short sale opportunity 241

Teaming up with the homeowners 242

Gathering payoff amounts 243

Crunching the numbers 243

Negotiating with the lien holders 245

Buying and Selling Junior Liens 249

Buying junior liens to foreclose for a quick payday 250

Buying seconds to protect the first mortgage251

Selling a junior lien for a profit 252

Profiting from Property Tax Sales 252

Tracking down property tax sales 253

Finding golden tax sale opportunities 254

Buying tax deeds or certificates? 255

Getting redeemed out of your position 255

Profiting from the tax lien or deed 256

Part V: Cashing Out Your Profit . . . after the Sale 257

Chapter 16: Assisting the Previous Homeowners Out the Door 259

Tying Up the Loose Ends after the Purchase 260

Closing on a pre-auction purchase 260

Tying up the loose ends after the auction 261

Protecting Your Investment through Redemption 262

Maintaining the property’s status quo 262

Securing the property 263

Keeping hungry investors at bay 264

Planning Repairs and Renovations 266

Evicting the Residents when Time Runs Out 267

Chapter 17: Repairing and Renovating Your Investment Property 269

Choosing a Renovation Strategy 269

Planning Repairs and Renovations 270

Calculating the return on your investment 271

Roughing out your budget and schedule 272

Giving Your Property a Quick Makeover274

Freshen the exterior 274

Gussy up the interior 275

Tidy up the kitchen 276

Scour the bathrooms 276

Spiff up the bedrooms 276

Make the basement tolerable 277

Attend to the mechanicals 277

Investing in High-Profile Rooms: Kitchens and Baths 278

Cooking up a remodeled kitchen 278

Adding Valuable Features 280

Chapter 18: Cashing Out: Selling or Leasing Your Property 281

Selling Through a Qualified Real Estate Agent 282

Selling faster for a higher price 282

Choosing a top-notch seller’s agent 284

Staging Your House for a Successful Showing 285

Jazzing up the front entrance 285

Decluttering the joint 286

Adding a few tasteful furnishings 286

Appealing to the senses 287

Generating Interest Through Savvy Marketing 287

Negotiating Offers and Counteroffers 289

Comparing offers 289

Mastering the art of counteroffers 290

Closing the Deal 291

Becoming a Landlord 292

Chapter 19: Checking Out Other Cash-Out Strategies 295

Refinancing to Cash Out the Equity 295

Reselling the Property to the Previous Owners Or Their Family 296

Reselling to the previous owners 296

Financing the buyback through insurance policy proceeds and other means 299

Leasing the Property to the Foreclosed-Upon Homeowners 299

Offering a Lease-Option Agreement 300

Assigning Your Position to a Junior Lien Holder 302

Part VI: The Part of Tens 305

Chapter 20: Ten Common Beginner Blunders 307

Having Insufficient Funds on Hand 307

Overestimating a Property’s Value 308

Underestimating Your Holding Costs 308

Overbidding in the Heat of Battle 309

Failing to Investigate the Title 309

Failing to Inspect the Property with Your Own Eyes 310

Bidding on a Second Mortgage or Junior Lien 310

Renovating a Property before You Own It 311

Trusting What the Homeowners Tell You 311

Getting Greedy 312

Chapter 21: Ten Ways to Maximize Future Leads by Acting with Integrity 313

Stopping the Bleeding: Providing Basic Financial Advice 313

Assisting Homeowners in Their Job Search 314

Suggesting That the Homeowner Seek Help from Family and Friends 314

Encouraging the Homeowners to Contact Their Lenders . . . and Soon 315

Suggesting Short Sales and Other Debt Negotiations 316

Assisting Homeowners in Assessing Their Refinance Options 316

Suggesting the Option of Selling the House before Foreclosure 317

Bringing Up the Bankruptcy Option 317

Offering a Helping Hand 318

Revealing the Option to Walk Away 319

Chapter 22: Ten Tips for Avoiding Common Foreclosure Minefields 321

Steering Clear of Foreclosure Investment Scams 321

Researching the Title Yourself 322

Inspecting the Property with Your Own Eyes 322

Knowing What You’re Bidding On 322

Setting Realistic Goals 323

Muffling Your Emotions 323

Investing with Integrity 324

Anticipating Delays 325

Foreseeing Unforeseen Expenses 325

Dealing with the Blame and Guilt 326

Appendix: Foreclosure Rules and Regulations for the 50 States 327

Alabama 328

Alaska 328

Arizona 329

Arkansas 329

California 330

Colorado 330

Connecticut 330

Delaware 331

District of Columbia 331

Florida 332

Georgia 332

Hawaii 332

Idaho 333

Illinois 333

Indiana 334

Iowa 334

Kansas 334

Kentucky 335

Louisiana 335

Maine 335

Maryland 336

Massachusetts 336

Michigan 337

Minnesota 337

Mississippi 337

Missouri 338

Montana 338

Nebraska 339

Nevada 339

New Hampshire 340

New Jersey 340

New Mexico 340

New York 341

North Carolina 341

North Dakota 342

Ohio 342

Oklahoma 342

Oregon 343

Pennsylvania 343

Rhode Island 343

South Carolina 344

South Dakota 344

Tennessee 344

Texas 345

Utah 345

Vermont 346

Virginia 346

Washington 346

West Virginia 347

Wisconsin 347

Wyoming 348

Index 349