10 Steps to Buying a Foreclosure 1. Become pre-qualified

It's important for a buyer to be pre-qualified before engaging in discussions with a seller. Pre-qualification ensures that a buyer is in the financial position to purchase a property. A pre-qualified buyers is in a stronger position to negotiate.

2. Assess the condition of the property

If at all possible, visit the property, ask your realtor's opinion, and review pest and structural reports to make sure that the property is in acceptable condition, or to determine how much of a rehab budget you'll need to build into your purchase.

3. Determine the property value

Look at the original purchase price and recent comparable property sales to determine the current value of the property.

4. Determine the remaining loan balance

Find out the amount in default and the remaining loan balance. To determine a reasonable offer price, you'll need to know the minimum amount of money it will take to satisfy the debt to the lender.

5. Run a legal investing report

Before purchasing any foreclosure property, make sure it is free and clear of any bankruptcies, tax liens or other financial liabilities. Contact a title company for insurance coverage.

6. Assess the condition of the property

Visit the property, ask your realtor's opinion, and review pest and structural reports to make sure that the property is in acceptable condition, or to determine how much of a rehab budget you'll need.

7. Leverage your timing

Knowing when a property is going to be auctioned gives you an extra bargaining chip when negotiating with the seller or the lender.

8. Make an offer

The best savings can often be made at the pre-foreclosure stage, where homeowners can avoid a foreclosure and lenders can save the time and cost involved in going through the foreclosure process. It often pays to make an offer just before the property goes to auction.

9. If the owner or lender refuses your offer

Bid on the property at auction. Most auctions require that you pay cash immediately, once your bid has been accepted. Figure out the maximum you are willing to pay for the property and bring that amount to the auction.

10. Be ready to bid on multiple properties

There are usually multiple foreclosure properties up for auction. So if the property you want the most goes to another individual you can bid on your back-up properties.

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Determine the Real Estate Financial Statistics for a Property

Before you buy an investment property it is critical that you create your own projection of the property's profitability. Real-Estate-Proforma.com has a quick-proforma with which you can calculate real estate financial statistics such as Internal Rate of Return, Capitalization Rate, Cash-on-Cash, Debt Multiplier, Loan-to -Value Ratio, Debt Coverage Ratio, and Mortgage Payments. You can use this JavaScript proforma to project the profitability of a real estate project. By becoming a member you will receive access to a number of Excel real estate proformas. membership | services

If you are analyzing another person's proforma, or you are examining a prospectus for a real estate deal, it is very important that you read the document carefully and determine how the values of the financial statistics above are being calculated. For instance, values such as the Cap Rate may be determined from overly optimistic projections of the future rental income of a property.

You can "reverse engineer" the financial projections you receive from a prospectus and/or request the Excel (or other type of) spreadsheet a developer used to create their proforma. A very useful Excel or Visual Basic macro used to check Excel formulas is available in the spreadsheet below for download. Download Mortgage Formula Excel Spreadsheet

The due-diligence you do on a potential investment may uncover a number of potential problems with a real estate deal and we suggest you research each real estate investment very carefully. There are a variety of real estate financial consultants who can help with this, but if you are like many Real-Estate-Proforma.com members, you can or are learning to do your own due-diligence.

We hope you become a more successful real estate investor by using this site! membership | services