Hiring a real estate professional can be extremely helpful to real estate investors. In fact, having access to expert advice is an effective way to avoid the common pitfalls of real estate investing. A good example of this is when you’re in the market for an investment property. But is a specialist always needed? And is hiring a real estate agent the only way to ensure that you’re getting a good deal? In this article, we will focus on foreclosure properties and answer the question of whether or not you need a foreclosure specialist when investing in one.
The Basics of Foreclosure Sales
Most real estate investors are familiar with the concept of foreclosure sales. It refers to homes that the lender auctions off after the mortgage falls into default. The process involves several steps and buying a foreclosed home requires a firm understanding of all of them. Here’s how a foreclosure sale works.
Related: What Is a Foreclosure? How Can You Invest in One?
1- Mortgage default
This is what triggers the foreclosure process. When the borrower misses at least one payment, the lender will send a Payment Notice. If the homeowner misses another payment, they will receive a Demand Letter from their lender. At this point, a quick resolution between the two parties is still possible.
2- The reinstatement period
If the borrower continues to miss payments, the lender will have to send a Notice of Default after 90 days. The loan itself will be transferred over to the foreclosure department. After this, the borrower will have another 90 days to make the payments. This period is called the reinstatement period.
3- Notice of Trustee’s Sale
After the end of the reinstatement period, the lender will record a notice of a Trustee’s Sale. Additionally, the public will be informed of an impending auction. The notice that the lender publishes contains all the essential information that pertains to the income property. This includes the name of the owner, the address, and the location and date of the auction.
4- The public auction
This is where real estate investors who are interested in buying a foreclosure can bid for the property. The auction starts with an opening bid that is based on the value of the outstanding loan. After the conclusion of the auction, the highest bidder receives a Trustee’s Deed Upon Sale.
It’s worth noting that an auction does not always result in a sale. In some cases, the lenders will have to find buyers themselves as the properties become bank owned homes. This is usually done through an REO specialist (Real Estate Owned). As an investor, these are the properties that you have to keep an eye on. In any case, let’s go over how to buy a foreclosed home and examine if a foreclosure specialist is truly needed.
The Steps to Making a Foreclosure Investment
Buying a foreclosed property is easier than you think. Here is how you can do it in a few simple steps.
1- Secure a mortgage
Before thinking of hiring a foreclosure specialist, you must first secure a mortgage to finance your real estate investment. In fact, you will have to get a loan preapproval before starting the search process. You have the option of obtaining a loan from the same bank that is selling the property. This might seem like a conflict of interest, but in fact, banks keep the loan issuing department and the foreclosure department separate.
2- Find a foreclosed property to invest in
The next step is finding the ideal foreclosure property to invest in. There are several options that are available to you here. Most novice investors opt for hiring a foreclosure real estate agent that can guide them through the entire process. Experienced investors, on the other hand, are more likely to take on the project by themselves.
Even as a beginner, working with a real estate agent or a foreclosure specialist is not your only option. As a matter of fact, you can find and analyze foreclosures right here on Mashvisor! The Mashvisor Property Marketplace features hundreds of foreclosure listings and boasts a plethora of valuable data that can help you identify the perfect investment opportunity.
Related: How to Find Foreclosures: The 9 Best Ways
3- Finalize the real estate deal
The way you close the deal varies depending on how you acquire the real estate property. Generally speaking, finalizing the purchase of a property after winning an auction is a simple and quick process. On the other side of the spectrum, buying a foreclosure directly from a bank can drag out for a while. Banks are extremely diligent when it comes to limiting their losses. Consequently, they tend to delay the process in order to properly assess the risk.
Related: What’s Foreclosure & How to Invest in One? – Infographic
Working with a Foreclosure Specialist
Like we mentioned earlier, hiring a foreclosure specialist is one of the options that are available to real estate investors. Let’s explore how these professionals operate.
What is a foreclosure specialist?
As the name suggests, a foreclosure specialist is a real estate professional that specializes in foreclosure deals. This includes everything from helping distressed homeowners restructure their loans to assisting investors with the purchase of a foreclosed property.
What does a foreclosure specialist do?
The job of a foreclosure specialist entails several duties. When working for a homeowner, a foreclosure expert will go over a litany of paperwork in an effort to find the ideal resolution for the client. Furthermore, they maintain close contact with all the parties involved to ensure that the process is progressing smoothly. When working for a real estate investor, the foreclosure specialist will do all the groundwork for the client. This includes finding suitable foreclosed properties and carrying out investment property analysis on them.
How do you find a foreclosure specialist?
If you have never worked with foreclosure specialists before, then you are probably asking yourself “How do I find foreclosure agents near me?” Here are a few ways you can find one with ease:
- Talk to local real estate agents and ask them to refer you to a trusted foreclosure specialist
- Search for foreclosure specialists online
- Filter MLS listings by short sales and REOs in order to find agents with foreclosure experience
The Verdict on Hiring a Foreclosure Specialist
Hiring a foreclosure specialist can significantly facilitate the purchase of a foreclosed property. This especially applies to novice real estate investors. Having said that, this is by no means an affordable option. Specialized real estate agents command high fees that can eat into your margins. More importantly, the advent of all-encompassing platforms such as Mashvisor has made it possible for investors to search for and analyze properties without the need for professional guidance.