How To Buy An REO Foreclosure Part 1 of 5

Welcome to How to buy a Foreclosure video series. I'm Vincent Jackson from Do Your Own Loan.com In this video series I explain One of Five ways to buy REO's REO's are Real Estate properties that are owned by a Lender. Why would a lender take a loss and work with you to buy a property under market value? Because lenders are not in the rental property or property owning business. If a lender has a large backlog of unsold foreclosures. Such as new homes, unfinished homes, condos or even apartments. That lender is losing money very fast. If the market is slow they can foresee big losses. This creates an opportunity to save big and buy below market value. Here are the five methods I will discuss in detail on this 5 part video. 1. A lease option from the lender 2. Equity share with the lender 3.New loan or refi on the 1st mortgage with a discount on lender's price on 2nd mortgage 4. An option contract from lender to resell a half interest to an investor. 5. Renegotiate terms and interest with the lender Then find limited partners and structure a down payment as prepaid interest. Of course not all lenders work the same. Some are more desperate than others. You should do a little research and identify lenders who are more willing work with you. Understanding your options will make the purchase deal work to your advantage. Right now let's look at buying a foreclosure technique using a lease option from the lender. First get yourself a list of REO's in your area. Pick out a nice house from your list. And if you don't already own a house, This is a great way to buy a house for yourself. Next contact the lender and ask them to give you a lease with the option to buy. You should ask for a year lease, or even a longer term, based on how long it might take for the economy to recover, or for your investments to create the right time to actually buy the house. Remember this technique is a lease option. You are locking in numbers today, so you can get a great deal or profit later on. As you talk to the lender tell them that you will take good care of the property. If necessary consider giving the lender a list of improvements you will make to the property. In exchange for making improvements and maintaining the property, you should negotiate a lower lease payment or option price. Basically you want to sell the lender on the idea you will be good for their house. Bottom line is you want to negotiate the best price on the house, and as low a monthly lease payment as possible, next, in the deal, structure to get the best financing terms the lender will give you for the eventual purchase. Ok now let's assume you made a great deal with the lender and you have control of the property. At the end of the year, or whatever lease terms you negotiated. Remember your lease terms are based on what you think is going to happen in the economy. Then at the end of the lease terms.You now have several choices. You can excercise the option to buy the house, and either resell it at a profit, you can live in the house, rent it, lease it, lease option or equity share the property. OR, If the market has become still worse, You could give the house back to the bank, or try re-negotiating a lower payment and better sale price with the lender since the market detiorated since your lease option contract. And still another option is you could sublease the property to another party, giving yourself a positive cash flow. If you can buy the house for a discounted market price, or not more than the price owed, you should be looking forward to a nice profit.

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Google Video | September 27, 2007

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