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Aug '23 in General discussion
5 Ways to Profit from The 3 Stages of Foreclosure
There are 3 stages of foreclosure:
  1. Preforeclosure - this is when the borrower becomes 90 days late on the mortgage and the bank will file a Lis Pendens (or Notice of Foreclosure) in court
  2. Foreclosure Auction - if the borrower does not take action to stop the lender from foreclosing, the property goes to auction.
  3. REO (real estate owned) - the bank will usually BID at the auction to push the price up to the price they want. When they don't get it, they end up owning the property.
How do you make money at each foreclosure stage?
During the PREFORECLOSURE STAGE...
  1. Joint venture/ Take over the Mortgage/ Mortgage Assumption - you can help the seller by making the back payments, taking over the operations, and working with the lender so you can assume the mortgage. You can even buy the property for NO MONEY DOWN. I've done this for 3 hotels.
  2. Buy the NOTE - here, you work with the lender directly and see if you can buy the mortgage note at a discount. Then you become the bank and you can foreclose on the borrower/seller or you can restructure the note. I've bought hundreds of nonperforming mortgages. Some of them I flipped for a quick $5K-20K per note. Some I've restructured the note, became the bank, and generated truly passive income (I don't have to deal with tenant issues).
  3. Do a SHORTSALE - here, you buy the property from the seller for a price BELOW or short of the loan balance. Then you can turn around and wholesale the property, rehab it and flip it or rehab it and rent it out.
During the AUCTION...there's one way and that is to BID on the property and be the winning bidder. The downside is COMPETITION of course and you need to be a cash buyer.
The last stage is REO - here, you buy the property either directly from the bank or through a broker. Then you can turn around and just resell it "as is" or fix and flip it or BRRRR it.
There are a lot more details of course but I can't cover them here for this post will be too long. Instead...
I am giving away the presentation slides I used during our FORECLOSURE MASTERCLASS last Wednesday. Who wants it?
{In the photo - is a hotel I bought NO MONEY DOWN during the PREFORECLOSURE stage}
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Mike Ealy
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5 Ways to Profit from The 3 Stages of Foreclosure
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