NUTS & BOLTS
NOT BORROWING TROUBLE, BUT BUYING IT F oreclosure properties tend to come with issues, and as the new owner
FREEDOMOF INFORMATIONACT (FOIA): A piece of legislation that grants public access to documents or other data in possession of a government agency or public authority. Real estate investors can leverage FOIA to get information on foreclosure properties. FOIAFORM: You can fill out a FOIA form for any agency record. There is no universal FOIA form, but most agencies and public authorities have their own form and their own department to service FOIA requests. FORECLOSURE RECEIVERSHIP: The receivership process typically begins when a property owner stops making payments on a property. The receiver is responsible for controlling the property and maintaining its value. These can happen in commercial and residential properties.
it is your responsibility to deal with them. Find out exactly what you are getting and factor in the cost of dealing with potential prob- lems when you evaluate a deal. Here are examples of potential issues that may come with the purchase of a foreclosure property:
• Unpaid utilities • Mechanic liens • Tax liens • Ongoing litigation between owners or former owners
FourWays to Find Foreclosures THERE ARE STILL PLENTY OF FORECLOSURE DEALS OUT THERE IF YOU KNOW WHERE TO LOOK.
closure properties. They may be able to give you a heads up on bank properties first. If a broker has developed a business relationship with a bank, the institution may give them first opportunities on any real estate that the bank is receiving and will be marketing for sale. TIP #4 Investigate Code Violations Finally, head back to the courthouse and check with city Building and Zoning Hearing Division Court to see what properties have been problematic for the city. When prob- lems arise because of a property, it is an issue for the mu- nicipality, owner, the neighborhood, and the homeowners’ association (if there is one). The property could have unpaid utilities and/ or code violations. When code violations are safety and health issues, the court will move forward more hastily to resolve the problem. Some properties end up in court because the city has moved forward in appointing a receiver to get these issues taken care of. This could present an opportunity to deal with the court and the receiver on a possible purchase of the asset. If your purchase of the property helps the city resolve these issues, your offer is likely to be quite attractive. Just remember that when you buy a property with problems, its problems may become yours (see sidebar). •
RECEIVER: A person appointed to take temporary legal
possession of a mortgaged property in order to pay expenses, maintain the property and any associated income, and turn accounts over to the court.
by Jim Paul
REAL ESTATE OWNED (REO): Property that is owned by a lender after foreclosure.
THE FREEDOM OF INFORMATION ACT (FOIA) I nvestors will best utilize FOIA when they have a little background on it. The Freedom of Information Act (FOIA), 5 U.S.C. § 552, is a law that allows for disclosure of previously unreleased information and documents that is in the possession of the federal and state agency. Government agencies are required under the Act to grant disclosure of materials held by them. Exceptions are granted if they fall under one of nine exemptions which protect interests such as personal privacy, national security, and law enforcement. In a foreclosure case, by utilizing the FOIA, you can get ac- cess to receiver reports, contact information, court orders filed on behalf of the parties named in the case, HOA documents, building and development plans, to name a few of the most common examples. In the end, this information could help determine whether or not to pursue a property as part of your portfolio and should play a crucial role in your due diligence.
ven though foreclosure activity has fallen 14 percent in the past two years, there are still plenty of good fore- closure deals for real estate investors who know where to look for them. In fact, approximately 940,000 foreclosure cases were filed in 2016. The opportunity is still available to acquire a good investment through a foreclosure receivership or court foreclosure. You just need to know how to find them and how to make them yours. There are four easy ways to find properties in foreclosure. Once you have identified foreclosure properties, you can eval- uate them to see if they meet your requirements for a good investment opportunity. TIP #1 Look at Court Records in Your Target Market Foreclosure cases are often published in local newspapers, or you can reach out to your market’s local Clerk of Court. Information about foreclosures is a matter of public record, but some counties may require you to file a Freedom of Informa- tion Act (FOIA) form in order to access the list (see sidebar). Check to see if a receiver is assigned to the case. If one is present, reach out and mention that you are interested in the property. Although receivers cannot sell the property on their
own, they can let the court and anyone else with interest in the property know about your interest and your offer. In the end, the court will make the final decision on whether or not to list the property and eventually sell it. TIP #2 Just Ask the Bank You can also find out about the availability of properties in REO by going to lenders’ websites. Most lenders have a real estate portfolio section on their website that shows properties for sale. Using this resource, you will be able to review prop- erties that have already gone through foreclosure and work with the bank’s loss mitigation experts to reach an agreement if you wish to make a purchase. TIP #3 Reach Out to Specialty Brokers Another way to find possible investment properties is to reach out to real estate brokers who only specialize in fore-
Jim Paul (ALPS Group) is a court-appointed receiver in multiple states, a paralegal, and a land developer. He can be reached at 312.860.7377 or email him at email@example.com.
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