 We are currently facing a record number of foreclosures, thanks to the bad lending practices of the past few years, and the "irrational exuberance" spurred on by promises of guaranteed profits and equity from real estate. Understanding what got us to this point is important for policy makers and industry higher-ups so that we never see this situation again.
But understanding how to move forward and take advantage of the high availability of foreclosures is probably of more importance to those who are planning to buy in this market. In this article, I'll discuss how you can be effective in the foreclosure market, whether you're a first-time homebuyer or a would-be real estate investor.
First of all, we should understand that there are different stages in the foreclosure process, and quite often a good deal can be found within each of those stages. Let's look at the stages...
1. Pre-foreclosure - These are homes that you discover through public records are about to go into foreclosure. Public records can be local newspapers or courthouse postings, required to be performed before the foreclosing lender can finalize the foreclosure process. Obtaining deals this way can be the most profitable because the owner may feel they need to get rid of the property quickly. A one-on-one negotiation can often be a huge win. Be careful though, the lack of orderly process means you may be taking a huge risk. You should seek legal advice to properly proceed with the purchase of a pre-foreclosed home directly from the owner.
2. Short Sale Listings - A short sale is where the owner of a property sells for less than the amount owed on the mortgage(s) for that property. Short sale listings are generally a little more orderly because they are typically listed with a real estate company for sale. The caveat here is that the negotiation with the bank on the price they will accept can sometimes take months.
3. Auctions - The caution with auctions is that the property must be pre-inspected, or you can be stuck with unexpected problems. You can get a great deal, but be sure that the owner has already vacated unless you have the gumption and determination to evict them quickly and efficiently. Also, have a pre-set bidding limit so you don't get into a bidding war with another interested bidder. Factor in your auction fees to your final price.
4. Foreclosure Listings - HUD, VA and traditional bank loans very often find their way to being listed with a real estate agent on the MLS. These are often the most orderly and quickest-to-close deals, because the entire process of eviction, property cleanout, and minor repairs would have been completed. The bank has made an assessment of value and knows their tolerances, so negotiation happens quickly also. The key here is to realize that there is often a great deal of flexibility in the price. Don't wait until you see the bank drop their price to make them an offer. By then you may have missed out or have to compete against other bidders.
Once you've identified a foreclosure of interest, you have to make sure you do your research. This research is two-fold. It involves doing a market analysis to know what price is a good deal for the property as well as determining the cost (if any) of bringing the property to acceptable living standards. Let's discuss both...
Believe it or not, sometimes foreclosures that are sold via auction can be sold for more than market value, due to the competitive nature of auctions. Similarly, a property that is being sold via short sale or pre-foreclosure that is under-priced can draw in a lot of interested parties and create a bidding war. It is important to know the neighborhood comparable sales and approximate subject property value, so you can know when you are indeed getting a good deal.
To the second point, often times a person who has gone into foreclosure or is facing foreclosure has stopped maintaining the property as they know they are going to lose it. So basic maintenance items may have been overlooked. Alternatively, if the property has been sitting vacant for a while, there are other problems that tend to crop up, due to lack of temperature and moisture regulation. Therefore, the first thing I'd recommend is to retain a good home inspector and competent contractors who can diagnose and give accurate estimates of problems.
Once you know the current value of the property, cost to bring maintenance items up to date, and the future value of the property, you can determine whether the deal makes sense for your purposes.
As an owner occupant, you'll want to have at least 10% equity left in the home as a cushion in a declining market. You won't necessarily have immediate access to this equity, but you will have protected yourself against unexpected market shifts.
If you're an investor, be sure you have 15-20% equity left in the property. This will ensure that you make a profit when you sell the home and pay your transactional costs, or allow you to protect your investment while renting the property.
Whether you're considering a foreclosure purchase as a primary residence, flip, or rental, I recommend that you read my article for investors to get additional information.
Courtesy of Troy Williams
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 Your next home is here! This beautiful townhome has been well-maintained by its original owners. Ample room sizes, spacious living areas, and a huge finished lower-level make this home a tremendous value. Fresh landscaping brings tons of curb appeal, while laminate wood floors give the living room a clean modern look. The large deck & fenced rear yard back to trees for a daily dose of serenity. Get more details about this property at http://www.410homes.com/9875bayline/
Courtesy of Troy Williams
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 Location, location, location. Areas with high-ranked schools, up and coming industries, proximity to a local city or very little new
construction tend to retain their value in a buyer's market.
Therefore, you should make your purchase taking these things into consideration, even if they don't affect you directly. For instance, you may not have kids, but still try to move into a good school district. Even if you don't ever sell, the value of the properties around you will hold up your equity, and give you options down the line.
Courtesy of Troy Williams
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 Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, is now circulating a proposal entitled the “FHA Housing Stabilization & Homeownership Retention Act.” While just a discussion draft at this stage, the proposal would significantly modify the FHA mortgage program. In particular, the proposal would allow HUD to refinance “at-risk” borrowers, essentially delinquent conventional homeowners who are now facing or are likely to face foreclosure in the near future...
I. Expanded FHA-Refinance for Individual Borrowers
- Eligibility Requirements for Existing Loans
- Requirements for New FHA-Insured Loans:
- Increased Fraud Prevention/Oversight
II. FHA Bulk-Refinance Facility
III. Loans and Grants to States for Foreclosure Relief/Mitigation
Courtesy of http://www.fhaloanpros.com/2008/03/rep-frank-proposes-major-fha-changes/
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 INGREDIENTS
◊ 2 tablespoons vegetable oil
◊ 4 (4 to 5 ounces each) boneless black sea bass filets, skin on
◊ 1 clove garlic, smashed and peeled
◊ Salt and freshly ground black pepper to taste
◊ 16 cherry or grape tomatoes, halved, large ones cut into quarters
◊ 1 1/2 tablespoons capers, drained
◊ 2 tablespoons sake
◊ 1 tablespoon soy sauce
◊ 2 tablespoons fresh lemon juice
◊ 1 1/2 tablespoons butter
DIRECTIONS
Heat the vegetable oil in a large skillet over high heat. While the pan is heating, rub the fish with garlic, then season with salt and pepper on both sides.
Place filets into the pan, skin side down, being careful not to crowd the pan. Cook until the skin is golden on the first side and the fish has turned opaque halfway up the sides. Turn the filets over and continue to cook until lightly golden on the second side. Transfer fish to a plate and keep warm.
Add the tomatoes and capers to the pan and cook for 30 seconds. Add the sake, soy sauce and lemon juice and stir to combine. Cook until reduced. Remove the pan from the heat and whisk in the butter.
To serve, divide the fish, skin side up, between four warm plates and spoon the tomatoes, capers and sauce on top. Serve immediately.
Courtesy of http://online.wsj.com/article/SB120977171371164053.html
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 According to the U.S. Agriculture Department, average consumer food prices are expected to rise by 3% to
4%. Despite these expected increases, you can ensure that your food costs remain stable or even decrease by planting a
garden.
Start off by deciding what types of fruits, vegetables and nuts you consume on a regular basis. Based on
your selections, you can purchase the plants and seeds you need. Next choose a location with at least 6 hours of a sun
a day. This counts for ground and container gardening. To ensure that you maximize your available space, outline your
garden on paper.
Once you've chosen your seeds and planned your space, prepare your garden space with compost for ground gardening or sterile soilless mix for containers (e.g., lava rock) and plant seeds, seedlings or plants based on the needs of the
plant.
To ensure that your produce grows, be sure to fertilize and water on a continuing basis. And pretty soon,
your whole family will able to enjoy fresh fruit in the Summer and frozen/canned food in the Fall/Winter season.
Courtesy of http://www.garden.org/ediblelandscaping, http://www.garden.org/urbangardening
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