WHAT DOES FORECLOSURE MEAN IN REAL ESTATE?
What does foreclosure mean in real estate? Have you wondered, “Should I buy a foreclosure for my first home?” Or is there a better way? Today you’ll learn about the foreclosure process and where the best deals are.
Today I’ll answer your question, “What does foreclosure mean in real estate?”
My short answer is, it means a bank, or a lender is repossessing a property.
I’m Ted Thomas, and for a number of years, I practiced purchasing real estate foreclosures. I did it for so many years, I became an expert and wrote a number of books about the subject. One stayed in the bookstore for over 12 years.
I trademarked the name “Mr. Foreclosure” and explained how to buy a foreclosed home.
Want to learn how you can make big profits from deep discount real estate? Would you like to buy homes for pennies on the dollar? Or earn double-digit interest rates? Learn how to secure your financial future with this FREE mini class today!
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – AN INSIDER’S VIEWPOINT
Expect to learn an Insider’s viewpoint on foreclosure and why I transferred and reinvented myself and my training systems from real estate foreclosure into tax liens and tax deed real estate.
Plus, I’ll give you some insight into the future of what’s happening in the real estate market.
I’ll give you a perception and understanding of what makes money and what doesn’t in real estate, and why the majority of newcomers flounder and fail and ultimately give up in frustration when they purchase how-to material online.
Foreclosures are a low-profit business, whereas tax deed real estate is a high income business.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – PROFIT MARGIN
So what does foreclosure mean in real estate? How do foreclosures work?
Real Estate foreclosures are fascinating to the average person.
The television gurus have managed to make real estate foreclosure a very glamorous business. They reveal dozens of average people magically getting outrageously wealthy and doing it quickly.
The truth about buying a foreclosed home is someone losing real estate to a lender or a bank, and people who learn this are trying to make money with very small margins.
Foreclosures are a low-profit business, whereas tax deed real estate is a high income business, which I will explain shortly.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – THE FORECLOSURE MARKET
Hundreds of thousands of foreclosures are recorded throughout the 3,000 plus counties across America.
This segment of the market is constantly cycling up and down. First there are too many foreclosures, then there are only a few foreclosures. It all depends on the economy and the job market.
People with no jobs cannot pay mortgage payments.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – VOLUME
Allow me a moment to give you foundational information.
Large counties, meaning large in population, will have many unpaid mortgages. You could expect hundreds of people to be in foreclosure in a county with a big population.
Counties with a small population can have 50 to 100 bank foreclosures.
What’s my point? There’s a huge volume. Volume is not the problem. The problem is equity, in other words, the margin between the mortgage and the selling price.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – EQUITY AND MARGIN
Foreclosure takes place when the lender is trying to recover collateral, which is the home. The lender starts the auction at what is owed, what they loaned on the property.
If a buyer has a 90% loan, that means there’s only 10% margin. It’s very difficult to make money if you pay 90% of the property value.
What’s my point? My point is profiting from purchasing foreclosed homes for sale at auction may be difficult.
An average property, if it has a 90% loan, does not have much margin between the loan and the retail value or market value.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – MODERN LOAN VALUES
It’s easier for young couples to purchase when the loan values are so high. Loans on properties can be 80%, 90%, and sometimes as much as 97%.
If that property ends up at a foreclosure sale because the buyer defaulted, it’s impossible to make money.
You couldn’t buy bank foreclosure homes for sale and make money; you would buy and lose money. That’s not the name of the game.
To make money in foreclosure, the buyer needs margin. If the bank would be willing to continue to discount, they’d call that a short sale. That might help, but it didn’t help in the crisis of 2008 to 2010.
Except in isolated cases, the banks repossessed the properties, and then the bank went broke.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – FIXER UPPERS
Foreclosure is not an easy market as most people think it is. It’s not glamorous as most people think it is.
But Ted, what about all the TV programs? Well, I can answer that by telling you, they’ll show you older properties, which have less value that have been used and abused, and they rehab those properties.
You’re creating value by fixing up the property, however, that could take six months, nine months or a year.
Obviously, if you use a crew, they are going to make a profit and do it quickly. Where do you get the money to pay the crew?
The point is foreclosure is not easy.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – FORECLOSURES VS TAX DEEDS
Now let me answer another question, what does foreclosure mean in real estate compared to tax defaulted property?
The foreclosure auction has a starting bid of the amount of the loan. If that loan is 60%, then the best case is to buy at 60%.
I much prefer to look at tax deed auctions where I can buy at 10% or 20% and have an 80% margin.
It doesn’t take long to figure out there is no comparison between a foreclosure on a mortgage or a deed of trust and a foreclosure at the tax auction.
The tax auction has a starting bid of 10% or 20% of the property’s value, while a foreclosure auction starts at maybe 50%, 70% or all the way up to 97%.
You can figure out which is the most glamorous and which is going to be the most profitable very quickly.
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WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – TAX DEEDS
You can buy properties at tax deed auctions for 5, 10, or 15 cents on the dollar.
These are not glamorous properties in the country club. However, they are livable three bedroom, one bath homes for 10 cents on the dollar.
Here’s an example. My student, Bill, has purchased 60 properties in six years.
He sells those homes himself using old plywood signs on the lawn, but he offers installment payments.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – INSTALLMENT PLANS
America buys installments on everything from refrigerators to furniture, to cars, to real estate.
Bill receives a down payment and then installment payments.
For example, he purchased a property for $5,000 at a tax sale, received a $5,000 down payment and then payments of $4,200 a year. In 10 years, he collects $47,000.
There’s no investor in the world that would mind investing $5000 and collecting $47,250 over 10 years.
WHAT DOES FORECLOSURE MEAN IN REAL ESTATE? – TAX DEFAULTED PROPERTY
The difference is you’re buying tax defaulted property for pennies. Whereas at a foreclosure auction, you’re paying off someone else’s big loan.
How do you buy foreclosures? Buy them very carefully. I could give you more lessons, but I think you already get the idea. What does a foreclosure mean in real estate? It means not much profit margin for the buyer.
Real Estate foreclosure will be here forever. However, there’s no comparison between foreclosures and tax defaulted property sold at tax deed auctions, where you can get amazing deals.
We hope you enjoyed Ted’s lesson, “What Does Foreclosure Mean in Real Estate?”
At a foreclosure auction, you’re purchasing properties that the lender repossessed because the property owner defaulted on the mortgage or deed of trust payments.
The bidding on foreclosure properties will start at the amount of the loan, which could be as high as 97% of the property’s assessed value. That’s not a lot of profit margin.
There is a better way, tax defaulted property. At a tax deed auction, the bidding starts at around the amount of the unpaid property taxes. Take into account that property taxes are about 1% or 2% of assessed value, so the profit margin is enormous.
At a tax sale, you can buy properties for pennies on the dollar and get them without a mortgage! The mortgage is removed from the property at a tax deed sale. That’s a bargain that can’t be beat!
If you’d like to know more about how to get the best bargains in real estate, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax defaulted real estate. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!