With Michigan’s economy seemingly forever marking the rest of the nation, how to buy foreclosed homes in Oakland County, Michigan has been gaining interest among real estate investors.
There are several methods that real estate investors can employ when deciding how to buy foreclosed homes in Oakland Country Michigan.
We will discuss this here.
First, you can bid on a home when it’s auctioned at the sheriff’s sale.
This is how this works.
When a homeowner misses 3 consecutive mortgage payments, they will be in pre-foreclosure. At this point, his mortgage lender (bank) will pass the information on him to an attorney who will present the mortgage default information once a week for 4 weeks as public information in a newspaper called Legal News.
28 days later, the house will be auctioned on the steps of the local county courthouse to the highest bidder. So if you’re going to bid, you’ll be competing against other investors and also against a bank agent, who will also bid on the house to make sure it doesn’t sell for a ridiculously low amount.
If the agent bidding on behalf of the bank wins, the property will be called REO (real estate ownership). This is just a term used to denote property that has gone through foreclosure and has been repossessed by the bank.
Before you decide to learn how to buy forclosed homes in Oakland County, Michigan, you may also want to consider learning the short sale investment strategy.
This is a strategy where you try to buy the delinquent mortgage note. before the foreclosure auction.
Is that how it works.
You contact the homeowner facing foreclosure and present yourself as an investor who can help their situation. You will need the owner’s approval.
They will then contact the homeowner’s lender’s loss mitigation department and attempt to negotiate a discount on the defaulted mortgage. It will make the case for homeowner hardship and why the homeowner will not be able to make mortgage payments. It will try to show how the property has flaws or other problems that will make the bank think about repossessing it as an REO after the foreclosure auction.
If the bank accepts your short sale offer, you will basically create instant capital. For example, let’s say the struggling homeowner owes $200k on the mortgage and the house is worth only $195k. If you could trade a short sale for $150k, you just created 45k in equity.
You’ll also be helping the struggling homeowner because you’ll be able to avoid foreclosure and the damage to your credit that this event would cause. Of course, they will have to move out of the house since you will be the new owner, but they would have had to move anyway if it had gone through foreclosure and the redemption period had ended.
How to Buy Foreclosed Homes in Oakland County, Michigan
Another example of buying foreclosed homes in Oakland County, Michigan is trying to buy the property from the bank when it becomes REO.
After the bank repossesses the house after foreclosure (assuming you’re the highest bidder at auction), you’ll now have a “non-performing asset” on your books. Banks don’t like nonperforming assets for several reasons.
One reason is because the bank is in the business of lending money and earning money on interest, not owning real estate. Second, federal law requires the bank to have a certain amount of cash reserves on hand for every dollar of “non-earning assets.” This means that for every dollar of bad debt the bank has on its books, it has an opportunity cost in the form of “good money” that cannot be lent until that bad debt is written off.
In short, this costs the bank money.
Lastly, banks, being publicly traded entities, suffer when they have too many bad debts on their books. Its stock price suffers as a result. The faster banks get their bad debts off the books, the better their share prices will be.
So if you can get REO listings, either through a mortgage broker or by networking with other real estate investors, you can bid on REOs that banks have. Some investors can purchase REO properties from banks for 40 to 50 cents on the dollar.
In short, being an educated real estate investor on how to buy foreclosed homes in Oakland County, Michigan can pay off big.