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Investing in Foreclosures

Prior to the auction

This first opportunity is called pre-foreclosure. When a property is in pre-foreclosure, the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. Lenders are required to advertise foreclosures in the legal newspaper for four consecutive weeks prior to selling the property at auction. During that time, the real estate investor can seek to purchase the property, either by paying cash for it, or by attempting to purchase the home contingent upon his ability to reinstate the foreclosing loan and taking title “subject-to” the existing loan.

Buying a pre-foreclosure can be a method to purchase a property with little or no money down and no credit especially if you are able to purchase the property “subject-to” the existing loan. Investors get the equity in the property in exchange for helping the property owners avoid foreclosure. The downside of purchasing a pre-foreclosure is that most homeowners are in denial, and it may be difficult to deal with them.

Purchases made during pre-foreclosure are considered “regular” sales in the sense that there will be a written purchase contract, your attorney will search title and offer you title insurance, and there will be a normal closing at your attorney’s office just as in any other home purchase.

RealQuest is one of the few sites that allow you to search for properties that are in pre-foreclosure. By you being find these opportunities faster than other real estate investors, you have the upper hand in the game. A subscription to RealQuest also delivers you the owner’s name and contact information, making it that much easier to proverbially “get your foot in the door” and make your offer to the existing owner.

At the auction

The second opportunity is in purchasing the property at the courthouse steps during the public auction. If nothing has been done to cure the event of default which led to the original foreclosure notice, the lender will, through the foreclosing attorney, conduct an auction on the courthouse steps. The property will be sold for cash. Only bank money orders will be accepted, and you must bring the funds with you. The bidding opens with a bid on behalf of the lender in the amount of the indebtedness plus all late payments plus attorney fees. Bidding continues until the highest bidder wins. Typically, all junior liens on the property are wiped out at the auction.

Purchasing a property at the courthouse steps lets you avoid having to deal with a property owner in denial. The downside is that you are most likely purchasing a property unaware of the interior condition of the property. RealQuest allows you to search the properties that are going to auction, so hopefully you can do some investigative work prior to the actual courthouse step auction date.

Lastly, this is not considered a “regular” sale because there is no contact and typically no title search is performed.

After the auction

This final opportunity is called REO. If, after the opening bid from the lender, there are no additional bids, then the ownership of the property is transferred to the lender, and the lender will typically try to sell the property as quickly as possible. Lenders will list these houses with real estate agents who will place them in the multiple listing services or they will hire auction houses to conduct another public auction. Lenders consider these REO properties to be “non-performing assets,” and want them off their books quickly; especially if they believe they have more coming in behind them. Often they will sell for substantially less than the loan amount, especially if the property is in poor condition or the lender has a large inventory of such property. Prior to the purchase the investor will be able to inspect the property.

This is a “regular” sale in the sense that there will be a contract, title search, and a standard closing in an attorney’s office.

There are multiple opportunities to purchase foreclosures and they can be purchased at these three distinct phases of the foreclosure process.

By | Jennifer Minge

Federal Tax Credits for Energy Efficiency

FROM ENERGYSTAR...

Tax Credits for Consumers:

Home Improvements

The Home Improvements tax credit has expired. The credits were available for home improvements "placed in service" from January 1, 2006 through December 31, 2007. You have until April 15, 2008 to claim credit on your 2007 taxes for any qualified home improvements made to your primary residence during 2007. If you made any qualified home improvements in 2006, but did not claim them on your 2006 taxes, you will need to file an amended return. You can not claim credit on your 2007 taxes for improvements made in 2006.
Tax credits were available for insulation, replacement windows, water heaters, and certain high efficiency heating and cooling equipment. The maximum amount of homeowner credit for all improvements combined is $500 during the two year period of the tax credit.
If you are building a new home, you do not qualify for the tax credits for "eligible building envelope components" (windows, doors, insulation, roofs) or "qualified energy property" (HVAC & non-solar water heaters). However, the tax credit for photovoltaics, solar water heating, and fuel cells is available for homeowners building new homes.

Efficient Cars

Tax credits are available to buyers of hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models. These credits are available for vehicles placed in service starting January 1, 2006. For hybrid and diesel vehicles made by each manufacturer, the credit will be phased out over 15 months starting after that manufacturer has sold 60,000 eligible vehicles. For vehicles made by manufacturers that have not reached the end of the phase-out, the credits will end for vehicles placed in service after December 31, 2010.

Solar Energy Systems

Tax credits are available for qualified solar water heating and photovoltaic systems. The credits are available for systems "placed in service" from January 1, 2006 through December 31, 2008. The tax credit is for 30% of the cost of the system, up to $2,000. This credit is not limited to the $500 home improvement cap.

Tax Deductions for Commercial Buildings

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. The credits are available for systems "placed in service" from January 1, 2006 through December 31, 2008.


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