The NEW GOLD RUSH: The Foreclosure Boom

Most of us are well aware of the California Gold Rush of 1847. Thousands of people rushed to California in search of gold in hopes of gaining great fortune. It is true that many left disappointed and with significantly less than they arrived with. However, many people actually did find gold, lots of it and it dramatically changed their lives and the lives of their descendants, even those living today.

Over the past year or so, the number of houses for sale (inventory) has been increasing dramatically. For example, according to a chart provided by the Wall Street Journal1 , between October of 2006 and March of 2007 housing inventory in Los Vegas went from about 40,000 to about 120,000, Chicago went from about 46,000 to about 89,000, Miami went from about 25,000 to about 76,000, Pheonix went from about 17,000 to about 51,000. Housing sales is not dropping off significantly but the number of houses for sale is increasing very dramatically.

What does all this mean? Selling a house is very difficult in today's market. According to the US Department of Labor2 inflation has gone up about 15.5% between 2002 and 2007. People are generally less able to pay bills than they were. According to an article published on RealtyTrac.com3, in the year 2005 alone, from the first quarter to the last quarter, the number of houses in some state of foreclosure throughout the United States increased about 25%. This means an awful lot of houses are going into foreclosure. This means an awful lot of people need to sell their houses quickly and cannot. This means an awful lot of houses are available for a whole lot less money than even their current market value.

So how do you go about finding a house that is in foreclosure? Finding *all* properties that are in foreclosure is very easy. Every County in the US has a records department where legal documents are recorded. Foreclosure documents are recorded in the County in which the house in question is located. These records are available to the public. Different States have different laws on foreclosure so you need to learn what documents are filed to initiate foreclosure proceedings in your State. In the State of Florida, the first document recorded is a Lis Pendens which officially notifies the owner/borrower that the lender intends to foreclose. By looking up the records you can learn the address of the property and usually the name and address of the owner/borrower. You can also subscribe to foreclosure listing services so you can look them up from the comfort of your home, at your convenience.

You may ask, 'once I've found a house, how do I buy it?'. Especially if you don't have any money. Many ways to get money exist but two exist that are most popular among real estate investors:

1. You can take existing loans 'SUBJECT TO' which means you just take over the loan's payments, as is. You'd need to make up any back payments. This is not the same as to 'assume' a loan. You just take over the existing loan. Of course precautions exist: usually you'd put the house into a TRUST or something similar. Mortgage companies frown on it but it is legal. In fact most States have very strict laws (mostly concerning disclosure to the seller) about taking a loan SUBJECT TO. Real estate investors do it all the time and you can too.

2. HARD MONEY LENDERS - thousands of short term lenders exist who are more than happy to supply you with every dime you need to close a transaction. They're not usually worried about your credit, they're far more concerned with the feasability of the deal you have on the table. If they like the deal, they'll lend you the money. Often, you pay NOTHING until you close the deal or sometimes even sell the house.

So, you can buy the house from the owner/borrower before it goes into foreclosure (which helps the seller) or you can buy it at the foreclosure auction. Most investors seem to prefer buying before the auction.
Real estate investors generally will not pay more than 70% of the current fair market value of the property minus repairs and renovations.

You may ask, 'once I have the property, how can I sell it in this terrible housing market?'. Simple, don't get GREEDY! Sell the property for 85% of it's current fair market value. You'll need to make sure it looks *real* good, usually paint and carpet (which should have been negotiated into your purchase price). Advertise in the news paper, real estate publications and with about 40 small signs around the neighborhood. Offer real estate agents 3% if they sell it for you. Alternatively, you can sell it very quickly to another investor for a lower price, say 75%.

The housing industry is in alot of trouble right now. But like most things, a balance is naturally being established and in a great part, by real estate investors. Yes, today foreclosures abound, but many people with a bit of initiative are rushing in and snapping them up, making a whole lot of money, changing their lives and their families lives and simultaneously helping to solve the problem.

1. http://online.wsj.com/public/resources/documents/info-flash07.html?project=housingInv07-0604&h=540&w=750&hasAd=1
2. http://www.bls.gov/bls/inflation.htm
3. http://www.realtytrac.com/news/press/pressRelease.asp?PressReleaseID=86

Marl K. Atkins is an Internet marketing consultant specializing in the promotion of small and medium sized businesses. His website may be visited here: Florida Web Design Firm in Orlando