Is Buying a Trustee Sale a Risk Or an Opportunity?
An awareness of risks and benefits when purchasing property at a trustee sale will allow an investor the opportunity to leverage themselves in the real estate market.
An understanding of the variables involved will increase the strength of your real estate portfolio.
The more you know the more you will make.
There are numerous types of liens that may show on the title of a property.
Liens may include mortgage liens, property tax liens, homeowners' association liens, mechanics liens, and IRS liens.
Any of these lien holders have the ability to foreclose.
Be sure you research the title history before bidding on a home at the Trustee Sale.
If the lien you are buying is not a lien in first position, you may be acquiring additional liens that you were not expecting.
There are a number of ways to research liens and their positions.
The most accurate approach would be with the assistance of a Title Company.
They will have the ability to access all liens and their positions prior to purchasing the property.
After determining the lien is in a favorable position, an investor can begin analyzing costs for repairs associated with the home.
The term "As-Is" is synonymous with Trustee Sales.
There will be no home inspections, termite inspections, and no buyer or seller warranties.
There will also be no title insurance.
When bidding on a property at a Trustee Sale, be prepared to have a cashier's check in the amount of $10,000.
This is a non-negotiable deposit.
These funds are given to the trustee at the time of winning the bid.
If you have second thoughts or do not close the transaction the following business day, you will surrender your $10,000 and could face legal consequences.
The balance of the purchase price will be needed the following business day.
If you do not have your own cash, short term financing is available through hard money lenders.
These are not banks but individuals or small business who loan money at a higher than market interest rate.
An exit strategy to pay this off as soon as possible is a consideration that should be examined prior to borrowing the money.
After paying for the property you most likely have a "fixer-upper".
If you have done your homework, the cost of repairs was figured in prior to making your bid.
Customary repairs are paint, carpet, and miscellaneous handyman type work.
If the property requires more costly repairs, you should have known this from the start.
Since you are purchasing the home under market value there should still be equity in the property.
As the number of investors fluctuates with the trends in the current real estate market, you can expect to pay anywhere from 40% of market value all the way up to 80%.
The less work that a home needs, the higher the price investors are willing to pay.
If you have an exit strategy, whether it is a short term fix and flip or a long term rental investment, and follow the proven path of someone more experienced the first few times, you will be on track to an early retirement.
An understanding of the variables involved will increase the strength of your real estate portfolio.
The more you know the more you will make.
There are numerous types of liens that may show on the title of a property.
Liens may include mortgage liens, property tax liens, homeowners' association liens, mechanics liens, and IRS liens.
Any of these lien holders have the ability to foreclose.
Be sure you research the title history before bidding on a home at the Trustee Sale.
If the lien you are buying is not a lien in first position, you may be acquiring additional liens that you were not expecting.
There are a number of ways to research liens and their positions.
The most accurate approach would be with the assistance of a Title Company.
They will have the ability to access all liens and their positions prior to purchasing the property.
After determining the lien is in a favorable position, an investor can begin analyzing costs for repairs associated with the home.
The term "As-Is" is synonymous with Trustee Sales.
There will be no home inspections, termite inspections, and no buyer or seller warranties.
There will also be no title insurance.
When bidding on a property at a Trustee Sale, be prepared to have a cashier's check in the amount of $10,000.
This is a non-negotiable deposit.
These funds are given to the trustee at the time of winning the bid.
If you have second thoughts or do not close the transaction the following business day, you will surrender your $10,000 and could face legal consequences.
The balance of the purchase price will be needed the following business day.
If you do not have your own cash, short term financing is available through hard money lenders.
These are not banks but individuals or small business who loan money at a higher than market interest rate.
An exit strategy to pay this off as soon as possible is a consideration that should be examined prior to borrowing the money.
After paying for the property you most likely have a "fixer-upper".
If you have done your homework, the cost of repairs was figured in prior to making your bid.
Customary repairs are paint, carpet, and miscellaneous handyman type work.
If the property requires more costly repairs, you should have known this from the start.
Since you are purchasing the home under market value there should still be equity in the property.
As the number of investors fluctuates with the trends in the current real estate market, you can expect to pay anywhere from 40% of market value all the way up to 80%.
The less work that a home needs, the higher the price investors are willing to pay.
If you have an exit strategy, whether it is a short term fix and flip or a long term rental investment, and follow the proven path of someone more experienced the first few times, you will be on track to an early retirement.
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