Cashing Up With Foreclosures

By: philip smith

If you have been studying the opportunities available in foreclosures real estate just lately, then you have noticed a repetitive refrain. Cash is required.

Cash is required to seal a deal with a reluctant owner facing foreclosure. Cash is a prerequisite for the successful bidder at the auction. Cash is the attraction for the bank (the new owner) immediately after a failed auction to clinch that extra good deal. Cash is required to buy a discounted HUD home. Cash is also required to make the essential repairs and smarten up your newly purchased foreclosed property and flip it on without delay. Just how much cash, and is there an alternative if you don't have enough?

Financing a foreclosure deal is different. For one thing, the escrow time is very short for a pre foreclosure purchase and buying at auction usually requires closing immediately after or within days. Successful offers on foreclosed or REO property are 'all cash.' There is certainly no time to move through the prequalification/pre approval process after making an offer.

First up, get prequalified before you make that offer on a home in pre foreclosure. For bidding at the auction, get a line of credit set up, or make arrangements for a Hard Money loan. Hard money is similar to a bridging loan, but is based on the value of specific real estate. It's going to be more expensive than a home equity loan, but use it as intended, for a bridge.

Find another investor; assign him your contract for a finder's fee. These contract assignments are an excellent way to build your working capital while learning on the job by starting out as a 'birddog, you get paid at the same time as the seller.

Look for a home in pre foreclosure with equity. Buy really well taking over the existing mortgages 'subject to' and giving the seller a little cash. Your cash pays off the arrears in default on close of escrow, the property is deeded to you, you continue to make the monthly payments on time while you make essential repairs and look for a new buyer.

It's not the breeze that those late night commercials would have you believe, but with smart research into those foreclosures and the educational resources that abound online you will soon be taking your first steps toward cashing up.

Foreclosures
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