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Residual Income Through Real Estate
Part 6
System for Picking Foreclosures
Here’s simple format that I use. It’s only an outline and applies pretty much to assumable mortgages.
Consider it a template for you to develop YOUR OWN SYSTEM to research, analyze and pick properties.
FIRST
- Do your research to find a property early on in the first 3 or 4 months of difficulty.
- Go look at the property and, if possible, ask for an introduction to meet the owner. You MUST talk
to the owner!
- You MUST see the interior and exterior, or else walk away. There will be plenty of other deals.
Exterior does not necessarily equal interior.
- Determine appraisal and market value. Check county clerk’s office for current appraisal. What have
other similar houses in the area sold for? Use Yahoo real estate to find out.
- Keep a file or binder detailing notes on each property you look at.
Following is a form I use for a “first-look” and starting to track a pre-foreclosure. Again, this is
structured format to guide you and help to formalize a first impression. You should definitely look at a
property though, if possible, several times and in several conditions, e.g., at night, in the rain,
mid-day, around rush hour, etc.
POSSIBLE SALES
Date and Time Shown____________________________________
Shown By______________________________________________
Owner________________________________________________
Address_______________________________________________
_____________________________________________________
Day phone ____________________________________________
Evening phone_________________________________________
Trustee (or individual handling sale)________________________
Phone________________________________________________
Reason for selling_______________________________________
______________________________________________________
______________________________________________________
Availability or Urgency of Sale______________________________
Vacant, Yes___________ No_____________
If yes, has owner been located?_____________
Information on above_____________________________________
Proposed Foreclosure Date_________________________________
Cure Date______________________________________________
Deed or Torrens title? ____________________________________
Location_______________________________________________
Transferable or assumable mortgage?_______________________
Estimated Market Value___________________________________
Loan Balance Other Loans or Liens__________________________
Total of Loans__________________________________________
Estimated Fix-up Costs___________________________________
Total Costs (Loans and fix ups)_____________________________
Estimated Net Gain_______________________________________
CHECKLIST
Parking________________________________________________
Can it be rented?________________________________________
Age of structure_________________________________________
Builder________________________________________________
Style, stories or levels____________________________________
School District__________________________________________
Fire & Police____________________________________________
Public transportation_____________________________________
Medical facilities_________________________________________
Shopping______________________________________________
Recreational____________________________________________
Neighborhood___________________________________________
Subdivision_____________________________________________
View__________________________________________________
Crime statistics for the area________________________________
Registry of sexual offenders living in the area__________________
Attic___________________________________________________
Insulation_______________________________________________
# of bebrooms___________________________________________
# of Closets_____________________________________________
# of bathrooms__________________________________________
Size, fixtures, floors, bathtub_______________________________
Living room_____________________________________________
Family room____________________________________________
Laundry/utility room______________________________________
Layout of house__________________________________________
Floor coverings___________________________________________
Window treatments_______________________________________
Windows/storm windows___________________________________
Weather stripping________________________________________
Doors/storm doors________________________________________
Built-in cabinets__________________________________________
Paint___________________________________________________
Wallpaper_______________________________________________
Fireplace________________________________________________
Basement_______________________________________________
Furnace & water heater____________________________________
Air conditioning___________________________________________
Wiring__________________________________________________
Plumbing________________________________________________
Cable___________________________________________________
Appliances_______________________________________________
Roof____________________________________________________
Façade__________________________________________________
Windows________________________________________________
Drainage________________________________________________
Paint___________________________________________________
Siding__________________________________________________
Garage, attached?_________________________________________
Storage_________________________________________________
Waste removal___________________________________________
Lot acreage______________________________________________
Size & shape_____________________________________________
Shrubbery_______________________________________________
Trees___________________________________________________
Lawn___________________________________________________
Sprinklers_______________________________________________
Swimming pool___________________________________________
Patio___________________________________________________
Driveway________________________________________________
Traffic__________________________________________________
Zoning__________________________________________________
Flood plain_______________________________________________
Environmental hazards_____________________________________
Status of current occupants_________________________________
Certificate of Occupancy on file at town hall?____________________
Updated survey on file?_____________________________________
Do your observations match CO and survey file?_________________
Building code violations?____________________________________
________________________________________________________
Estimated cost to right violations______________________________
Rental permits on file?______________________Any illegals?______
Any incomplete services, e.g., sewer, electric?___________________
Unpaid utility debts________________________________________
SECOND
- Start gathering information. Call the trustee or whoever is responsible for the property.
- Fill in the above form, based on your site visit and information you get from the trustee.
- Go to the trustee’s office if it’s an attractive enough property.
THIRD
- Call or visit the bank to get the loan balance and monthly payments plus any related charges, as well
as any legal documents you will have to sign. Also look at the files at the county clerk’s office.
- Also inquire as to the position on the property, e.g., liens, mortgages, second mortgages.
FOURTH
- Get a title report to ascertain the title status of the property. Check for judgments and liens. If
there’s even a shade of doubt on the title, DON’T DO IT!
- Are there any legal actions or other liens pending against the current owner that could cause
conveyance problems?
- Have your attorney look over any pertinent documents. By the way, make sure the attorney knows what
they’re doing as relates to foreclosures and real estate law.
- Ensure that no documents contain fine print that restricts you or your abilities after the sale.
- Take out title insurance to protect yourself, just in case……
FIFTH
- Contact the owner.
- Owner or whoever has title to the property must sign the deed.
- If the owner is gone, you must find him. No sale with out the owner!
SIXTH
- Have the deed drawn up by your attorney, and have the attorney there at the signing.
- Have homeowner sign deed.
- Deed must be notarized.
- Upon ownership, have simultaneous fire, theft, vandalism, malicious mischief, etc. CYA (Cover your
assets)!
SEVENTH
- Take all signed documents and cashier’s check to the trustee to cure the situation.
- Register the deed with the local government offices.
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