How to Purchase Forclosed Homes in Oakland County Michigan

With Michigan’s economy seemingly forever flagging the rest of the Nation, how to purchase foreclosed homes in Oakland County Michigan has been gaining interest among real estate investors.

There are several methods real estate investors can employ when deciding how to purchase foreclosed homes in Oakland Country Michigan.

We will discuss these here.

First, you can bid on a home when it is being auctioned off at the sheriff’s sale.

Here’s how this works.

When a homeowner misses 3 consecutive mortgage payments they will be in preforeclosure. At this point, their mortgage lender (bank) will pass their info to an attorney who will file the mortgage default information once a week for 4 weeks as public information in a paper called the Legal News.

28 days later, the home will be auctioned off at the local county courthouse steps to the highest bidder. So if you go to bid, you will be competing against other investors and also an agent for the bank, who will also bid on the home 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 an REO (Real Estate Owned). This is just a term used to denote a property that has gone through foreclosure and that was taken back by the bank.

Before you decide to learn how to purchase forclosed homes in Oakland County Michigan, you may also want to consider learning the short sale investment strategy.

This is a strategy in which you try to buy the defaulted mortgage note before the foreclosure auction.

Here’s how it works.

You contact the homeowner facing foreclosure and present yourself as an investor who may be able to help their situation. You’ll need the homeowner’s approval.

You will then contact the loss mitigation department of the homeowner’s lender and try to negotiate a discount on the defaulted mortgage. You will make the case for the homeowner’s hardship and why the homeowner will not be able to make payments on the mortgage. You will try to show how the property has flaws or other problems that will make the bank think about taking it back as an REO after the foreclosure auction.

If the bank accepts your short sale offer, you will basically create instant equity. For example, say the distressed homeowner owes $200k on the mortgage and that the home is worth only $195k. If you could negotiate a short sale for $150k, you’ve just created 45k in equity.

You will also be helping the distressed homeowner because they will get to avoid the foreclosure and the damage to their credit that this event would case. Of course, they’ll have to move out of the home since you will be the new owner, but they would have had to move out anyway if it went through foreclosure and the redemption period ended.

How to Purchase Forclosed homes in Oakland County Michigan

Another example of how to purchase foreclosed homes in Oakland County Michigan is to try to buy the property from the bank when it’s become an REO.

After the bank takes the home back after the foreclosure (assuming it is the highest bidder at the auction) they will now have a “non-performing asset” on their books. Banks don’t like non-performing assets for several reasons.

One reason is because the bank is in the business of lending money and making money on interest, not from holding real estate. Second, Federal Law requires that the bank have a certain amount of cash reserves on hand for every dollar of “non-performing asset.” 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 can’t be loaned out until that bad debt is eliminated.

In short, this costs the bank money.

Lastly, banks, being publicly traded entities, suffer when they have too much bad debt on their books. Their stock price suffers as a result. The faster banks unload their bad debt from the books, the better their stock prices will be.

So, if you can get a hold of REO lists, either through a mortgage broker, or through networking with other real estate investors, you can make offers on REO’s that banks hold. Some investors can pick up REO properties from banks for 40 to 50 cents on the dollar.

In summary, being an educated real estate investor on how to purchase forclosed homes in Oakland County Michigan can lead to big profits.