Wednesday, September 26, 2007

Foreclosures: Selling Distressed Properties

by Nancy Osborne, COO of ERATE

Regardless of the stage at which you purchased foreclosure property, selling the property should be a far easier process. If you've done your research, you have laid the groundwork for acquiring a property in a location prime for selling so you can achieve the rate of return you're seeking. Doing your homework and arriving at the correct price to sell the property is of critical importance. There are ways to enhance both the property's appeal to a potential buyer along with improving your investment return if you take the steps necessary to apply them. Below are some tips which a savvy foreclosure investor can use to both sell a property faster as well as increase their return on the sale.


Develop an inspection checklist for the property to make sure all essential items are in working order. Any major repairs need to be noted and quickly determined whether you or a potential buyer will be the one to make them. However you must do the simple things that will help market the property and give it curb appeal. Give the house a new coat of paint, both exterior and interior, and make sure the carpet is clean and stain free. Landscaping should appear neat and well maintained. The house should pass a standard of professional cleaning, hire someone to do it if you are not willing or able to do it yourself. Needed attention should be applied to windows and window treatments as they can add or detract much from the lighting and appearance of the house. Kitchen and baths require special attention and all plumbing should work properly as well as all appliances, heating and cooling systems. You must be prepared to make a judgment call on any appliances that require replacing if they might be critical to promoting a faster sale. Also check all interior and exterior lights to be sure they are functioning properly, as well lit home will appear both cleaner and larger in size. Be sure all doors open and close properly as well and clean out anything remaining in the garage, basement or attic.

When arriving at a price, be sure to include any third party inspection work that's going to be required. No open ended fees and expenses should be left on the table, caps should be placed on everything. It is also important to carefully consider every offer you receive and not to jump at anything too quickly, you need to assure your profit is precisely what you are anticipating. Counter offers are the normal course of business and you want to put time limits on those as well as outlining what should occur in the event of any delays. You also need to plan how the transaction should proceed if the appraisal does not come in at full sales price. It would be very beneficial for you to have the same professional players involved in all of your transactions if possible, that is the same title company, escrow officer and inspection team if you can arrange it. This will help you save both time and money.

Additional ways to enhance your return beyond the initial purchase price include: selling the property yourself, as a real estate license would not likely be required if you are selling a home which you, yourself own. This will help save substantially on real estate commissions to the tune of 3-6%. You may also be able to sell the property subject to an existing mortgage, making it more attractive to a potential buyer if they do not have to apply for financing themselves but can simply assume a potentially lower than market rate mortgage already in place. You may also want to consider a seller carry back on the home which would involve extending credit to a potential buyer in the way of a second mortgage. This would also provide an additional return to you beyond what you sell the property for and could be an ongoing source of income if structured properly.

Buying and selling foreclosure properties is not for the novice real estate investor who only wants to dabble at something new without the expectation of making a significant time commitment. If you are serious about investing in foreclosure properties take the time to educate yourself about the process to insure that you do both the little as well as the big things right and hopefully you will find you are well rewarded for your efforts and can truly help a distressed homeowner in the process.

Nancy Osborne,   Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.

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At September 27, 2007 7:13 AM , Blogger Trent said...

I work for, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 9 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low... in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.


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