The 10 Commandments of Foreclosures (Part 3)

Today, we continue our series on the “10 Commandments of Foreclosure“.  (See Part One Here) (See Part Two Here). Not written in stone, but you ignore these rules at your peril:

  1. Know thy Process10 Commandments of Foreclosure
  2. Know thy Property
  3. Know thy Title
  4. Know thy Parties
  5. Know thy Occupant
  6. Know thy Judge
  7. Know thy Repairs
  8. Know thy Exit Strategy
  9. Know thy Buyer
  10. Know thy Closer

We covered #1-#3 in Part One.

#4-#6 was addressed In Part Two.

Part Three (this post), covers #7-#10 (Repairs, Exit Strategy, Buyer and Closing).

When we are done with this series, you should be fully prepared to bid at a foreclosure sale… or you should be too scared to bother.


#7- Know thy Repairs

Estimating repairs is the single most important profit factor… and helps determine your maximum acquisition price.

How to Estimate Repairs


First, be honest about the extent of repairs needed to flip or rent a home.  That is really the most critical step in your estimating process.

Honesty means you are looking at the repairs from your end user’s viewpoint.  You never want to leave something undone that turns a buyer off.  But on the other hand, you don’t want a bunch of upgrades that won’t increase the value to that buyer.  You can’t be an optimist, or your budget gets trashed when reality hits.  But a pessimist will never buy a house, because every deal looks bad.  You need honest, realistic, end-user based estimates.

Make sure the repairs or improvements you are looking at are justified by the property.  I love the patina of hand-scraped wood floors….  but I’d be insane to put them in a rental house.  At the same time, upgrading laminate counter-tops to granite might be just the ticket to sell a high-end house.  Again, the key is to focus on the expectations of your end-user.  NOT what you would want if you lived there (CLASSIC rookie mistake)– but rather what your buyer or tenant wants to see.

Add for Contingencies


What are contingencies?  The unexpected things.  The hot water heater that doesn’t heat.  The pool pump that craps out the day of closing.  The mold the last owner painted over.    The amateur wiring up in the attic.  The surprise things that pop up, despite your best efforts to put together a realistic budget.

The other contingency to budget for is the basic tendency of contractors to over-promise.  It always seems to cost more and take longer than they originally thought.  Especially when they realize you are new to the game.   But even with the most honest contractor, every job is going to contain a few hidden surprises.

When we estimate repairs, we automatically tack on an extra 10% for contingencies on new construction (less than 10 years old) and about 25% for older homes.  This covers most of the surprises that were lurking beneath the surface, provided we did a good job of being honest about what repairs went into our initial budget.

Contractors vs DIY


Until you have been doing this a while, you will pay at least 25% more for contractors and laborers than someone who does this full time…. AND it will take twice as long.  When we call our AC guy, we are asking him to put in three new units this week.  Our electrical contractor is going to one of our job sites every week.  So whose call is the electrician returning first? A first time customer asking about a price quote… or the guy who is making his boat payment?  The best price is always going to the loyal, proven repeat customer.

Contractors are expensive.  So lots of investors are tempted to do it themselves.  But doing it yourself can be even more expensive that hiring a pro.  Sure, there are some things where a little sweat equity might pay off… painting or putting out mulch. And for your first few houses, doing all the work can be a source of pride and accomplishment. But even if you are experienced AND competent, is it really the best use of your time?  Or would you be more productive hiring someone else to paint so you can concentrate your time and energy on finding the next house you want to buy?  If you enjoy doing rehabs, then by all means, knock yourself out.  But time is money too.

Also consider the impact of permits, insurance, compliance with code… all things your pro will take care of for you.  And consider the liability… the waiting lawsuit… if something isn’t done right.

Repairs determine acquisition price


When I am bidding on a foreclosure house, I pretty much know exactly how much the house is going to sell for once it is fixed up… and so do all the other experienced investors (we are all likely within 3% of each other).

And of course I know my minimum required return to be involved in a deal.

So that leaves just one variable: repairs.

If I plan on rehabbing and flipping a house, I’m going to base my maximum foreclosure sale bid price on what I think I can sell the house for once I’ve fixed it, less any expenses I plan on incurring, less my required profit.  Easy math.

So if we are bidding against each other and we have the same notion of value and repairs,  and we both plan on rehabbing and flipping, we are really just bidding to see who is willing to take less profit on the deal.

That repair number is really the most important factor in the equation, and even experienced investors will have wildly different estimates on repair bills.  I’m not often wrong on the value of the home, but my repair number is often way off base.  Sometimes too high… sometimes too low.  And errors either way cause problems.  If I overestimate the repair costs, then another investor is buying that house at the sale.  If I underestimate repairs, I make less than I needed.



Years ago, I read an article by lawyer/investor William Bronchick that he now calls “10 Easy Ways to Spruce Up your Rental or Rehab“.  Great read.  We swear by this list…. we always look at each of these as possible extras when doing a rehab.  These are things that rarely NEED to be done, so they are easy to overlook when estimating repairs.  But the money spent on these extras always pays dividends when your first buyer or tenant walks into the house.

  1. Replace electrical plates
  2. New six-panel interior doors
  3. New door handles
  4. Paint trim
  5. New front door
  6. Tile Foyer Entry
  7. New Shower Curtains
  8. Paint kitchen cabinets/New faucet
  9. Add shutters
  10. New mailbox

#8- Know thy Exit Strategy

Begin with the end in mind.  Always good advice.  So what are you looking to do with this house you are buying at the foreclosure sale?

Once you buy the foreclosure for cash, what is your exit strategy… your end use?  Different investors might specialize, or you may be open to multiple end uses, such as:

  • Flipping Wholesale
  • Flipping Retail
  • Renting
  • Lease Option
  • Contract for Deed
  • Owner Finance

It’s a good idea to know what other investors are primarily interested in doing with the homes they buy.  You may find a bargain outside the sale that is perfect for the foreclosure investor who likes rentals.  More importantly, it helps explain why someone bidding against you thought the property was worth a lot more than you did… they may have a different end use.

I have four different exit strategies when buying foreclosures, which give us a fair amount of flexibility (especially when bidding against other investors interested only in a quick flip):

  • flipping to other investors who want to do the rehab (wholesaling),
  • rehabbing and flipping to an end user
  • rehabbing and renting
  • rehabbing and selling to a buyer who needs owner financing.

Obviously, the exit strategy for a specific property depends on the age, condition, neighborhood, needed repairs, etc.  But we always know our exit strategy BEFORE we bid on the house.


#9- Know thy Buyer

Who is going to buy or rent your house?  What are they looking for?

Take the time to picture your typical buyer or tenant for a particular house, preferably before you buy it, but at the very least, before you start working on it.

  • What repairs, improvements, upgrades or extras will they expect?
  • Do they care about local schools, nearby shopping, public transportation?
  • Will your buyer shop on their own or through a realtor?
  • How does your buyer make the decision to buy?
  • How are they financing (Conventional, USDA, FHA, owner financing)?
  • What concessions or costs will they need?

Obviously, you are not going to discriminate against someone other than your typical buyer.  You aren’t going to exclude anyone.  But by targeting your rehab and marketing to your intended audience, you stand a much better chance of making them happy.

#10- Know thy Closer

Most people refer to the person at a title company or law firm who handles the contract closing paperwork as the “Closer” or “Closing Agent.”

But my definition of a “Closer” is anyone who can make or break a deal.  Here are a few of the people involved in the sale or leasing of your rehabbed property:

  • Listing Agent
  • Selling Agent
  • Home Inspector
  • Appraiser
  • Mortgage Broker
  • Mortgage Lender
  • Mortgage Underwriter/Guarantor
  • Title Underwriter
  • Title Agent or Lawyer

Any one of these people can scuttle your deal… or help make it go through.  As an investor, you need to know what each of these people are looking for in the process.

A closing has many working parts, and getting everyone involved to work together ultimately falls on the shoulders of the person selling the home.  After all… you don’t get paid if just one thing goes wrong.

So get to know ALL the closers, anticipate what they need, and make sure they have what they need to move your deal on to the next step.


The 10 Commandments of Foreclosure (Part 2)

Today, we continue our series on the “10 Commandments of Foreclosure“.  (See Part One Here) (Part Three Here). Not written in stone, but you ignore these rules at your peril:

10 Commandments of Foreclosure

  1. Know thy Process
  2. Know thy Property
  3. Know thy Title
  4. Know thy Parties
  5. Know thy Occupant
  6. Know thy Judge
  7. Know thy Repairs
  8. Know thy Exit Strategy
  9. Know thy Buyer
  10. Know thy Closer

 Part One covered #1-#3

This post (Part Two) covers  $4-#6

Part Three cover s#7-#10. 

When we are done with this series, you should be fully prepared to bid at a foreclosure sale… or you should be too scared to bother.

 #4- Know Thy Parties

Judicial foreclosures have at least one Plaintiff (the party bringing suit) and one Defendant (the party being sued).  But often there are many names on both sides of the case.


On the Plaintiff side, you might see:

  • The lender
  • The successor in interest
  • The servicer
  • The nominee
  • The trustee
  • The certificate holder
  • The securitization pool number, etc.

All of this is valuable information.  But primarily, you just want to know the party bringing the foreclosure has the legal right to collect.  When you do your title search, you will usually find the Plaintiff bringing the lawsuit is not the lender on the original note and mortgage (credit unions and small local banks are the primary exceptions).  The first step in your title search is to link the original lender to the party foreclosing.  This can get very confusing, but it is critical to ensure you are buying a property that has been properly foreclosed.

Think about your own home loan.  You may have gone to your local bank, closed on a loan… then that loan was sold within hours.  The next month, you got a notice to send your payment to a servicing company… a different company than the one that bought the loan from your bank.  And that servicer may have then been acquired by another company, and you suddenly had to send the payment somewhere else.

Well, things were WAY crazier with the low quality, high risk loans that proliferated during the boom (and which still make up the majority of foreclosures).  Go read about collateralized debt obligations, mezzanine tranches, GSEs and  credit default swaps, and you might see why the big banks started playing shell games with the mortgage note.

Shell GamesDespite these bankster shenanigans, you have to track the note from the party bringing suit all the way back to the original loan.  If the assignments are not recorded in the official records at the county level, they might be in the court file as an attachment to the complaint or motion for summary judgment.  Or they may not exist at all, in which case the judge never should have signed off on the foreclosure sale.  Shockingly, when you ask a judge to handle several thousand additional cases a year, some things fall between the cracks. 

If you don’t see a trail of ownership on the note, proceed with caution.  We’ve taken the gamble before, and been able to track down the right documents later… but that’s incredibly risky.  Sometimes you can connect the dots without recorded assignments– if you have a working knowledge of which banks are successor by merger or acquisition to other banks. GMAC is now Ally.  IndyMac is OneWest.  Wachovia is Wells Fargo.  And so on….

One plaintiff name you won’t see as often as you did a couple years ago is MERS (Mortgage Electronic Registration Systems).  Back in the early 1990s, the banks created MERS as a “nominee”, so they could get around the traditional assignment recording requirements at a county level.  The basic idea was lenders could buy and assign notes as part of their pools without having to record the assignments.   Then MERS would simply file the foreclosure if required.  Shockingly (heavy on the sarcasm there) the big banks misused MERS, and as the inadequacies of the model were exposed, states started requiring the actual lender or servicer of the note to bring suit as the Plaintiff.  But you will still see MERS named as a defendant on second mortgages pretty regularly.

You will also learn, with time and experience, which Plaintiffs tend to discount foreclosures below the judgment amount.  After months of spreadsheets, I gave up  trying to predict which Plaintiffs will discount with any precision.  But over time you will start to spot trends.  Keep in mind a single servicer might represent numerous investor pools, and every pool has a different set of discount guidelines– the same reason mortgage modifications and short sales are a huge time suck.  Even when the servicers and pool are identical, you may have different asset managers just making different decisions.  The BPO may have come back on one property and not another.  Or the foreclosure attorney forgot to give the bidding representative updated numbers. So you will get used to seeing two similar properties, with the same plaintiff, and the bank bids all the way to full judgment on one case, while discounting heavily on the next.

Defendant Side

On the Defendant side, you might see:

  • The Borrower
  • The Borrower’s spouse
  • The Tenant
  • Jane Doe/John Doe (unknown)
  • Estates/Guardian/Successor
  • Lienholders/Creditors
  • HOA/Condo association

On the Defendant side, you start by making sure anybody with an interest in the property or a lien against title has been included in the lawsuit.  If your title search shows a lien and the lienholder is not a defendant, that lien is not getting wiped out by the foreclosure.  If the property is owned by a husband and wife, and the wife isn’t named… you have a problem.  Buy that property at a foreclosure sale and you do not have marketable title.  You can’t sell the property with title insurance (which eliminates flipping to somebody borrowing money).

The sneakiest of these liens is when the first mortgage and second mortgage are held by the same bank.  The bank doesn’t have to name itself to wipe out the second mortgage if it already owns the second mortgage– the two loans can simply merge when the bank marks the second mortgage satisfied.  But if YOU buy the property at the foreclosure sale… well you don’t own the second mortgage, now do ya’?

On the other hand, you will often see the same bank as both Plaintiff and Defendant– why would that happen if they can just disregard a second mortgage?  Well, if the bank services the first mortgage for one pool and holds the second mortgage on its own, the bank is required to wipe out its own second mortgage to give clear title to the owner of the first mortgage that it services.  Yup— often the Plaintiff is hurting its own interests to fulfill its fiduciary obligations to a client (You are not permitted by law to feel sorry for them, though…).

You also want to carefully note any tenants listed as defendants, as tenants have a variety of protections under federal, state and local laws, as discussed in the next section (Know thy Occupant).

#5 – Know Thy Occupant

Ideally, you pull up to the house and see a “Field Asset Services” sticker on the window or garage door telling you the property is being maintained …. and it’s vacant.  The house is empty, the carpets are vacuumed, the yard is mowed, and the key you took from the lock-box on your last foreclosure purchase fits the lock on the front door.  Perfect.

Empty House StickerFor the past few years, that actually happened more than you would expect.  Now, things have changed.  Increasingly, the banks are keeping the cream-puffs to sell on the REO market.  They discount the crappy houses at the foreclosure sale.  They also discount the occupied houses.

If the house is occupied, the next step is to determine if it is occupied by the owner, a tenant, or someone else.  Your occupant determines how long it will take to get possession of the property after the sale.

  • Owners.  Usually pretty easy to kick out.  Depending on your judge.  Some judges require a separate case to evict any occupant.  Others will automatically issue a Writ of Possession to kick out an owner, since they have already gone through the process.  IF they don’t file an appeal, a bankruptcy, a sale objection, etc.
  • Squatters.  Happens more than you would think.  People move into an abandoned house, pay no rent, but don’t seem excited about leaving once you buy the house.  A surprising number of Squatters think they get the same protection as a Tenant.  And a surprising number of judges don’t seem to understand the difference either.  Your mileage will definitely vary with Squatters.
  • Tenants. Tread with Extreme Caution.  Used to be, tenants got kicked out just like owners.  Not any more.  In 2009, Congress passed the Protecting Tenants at Foreclosure Act.  Then in 2011, the Dodd-Frank Act amended and clarified the Act.  Tenants also may have state or local rights (or even judge-specific rights with no basis in any law….).  This is a complicated topic, deserving of its own  post… or more likely its own textbook.  But the quick version is that “bona fide” tenants get at least 90 days notice before eviction.  Tenants with a written lease get the entire term of their written lease.  So you might think you get the house immediately as the new owner.  Not true if you have tenants in place.

So how do you know who is occupying the home? Ask.  Knock on the door and say “I was wondering if the home is occupied?”  The answer to that is always a puzzled look– I came to the door didn’t I?  Then ask “are you the owner”?  Tenants will tell you right away they rent.  Owners may waffle a bit, but usually tell you they are the owner. 

I know…. you can’t imagine a stranger knocking on your door and getting a polite answer from you.  But the owners and tenants of foreclosure houses know “the knock” is coming.  Sure, you can call the electric company, talk to the neighbors, or do some online research.  But asking is a lot simpler.

While you are talking to the occupant, what else can you find out? What shape is the home in?  Any major problems?  Ask a tenant what the landlord hasn’t fixed that is really bugging them…. and expect an earful.  Landlords who keep collecting rent during a foreclosure have a nasty tendency to put off all repairs and maintenance.

We also ask occupants if they are aware of the foreclosure  sale and what their plans might be.  Just to see if they lie.  And a bunch of people do lie. When the occupant of a foreclosure house tells you they don’t know anything about this foreclosure thing… that’s a lie.  You  just can’t ignore the volume of legal documents getting mailed to the house and posted on the front door.  The occupant who lies to you about even knowing about the foreclosure is going to require extra effort to evict later on… count on it.


 #6- Know thy Judge

I don’t mean you have to be friends with the judge.  I mean you (or your lawyer) have to know how a specific judge will react to certain situations and arguments. And I want to know who our judge is on a particular case BEFORE I buy the property at the foreclosure sale.

Judge Gavel

Here’s an example of why I want to know the judge assigned to the case. In our judicial circuit, one judge handling foreclosure cases automatically has the Clerk of Court issue a Writ of Possession, without further court order, as soon as the Certificate of Title is issued.  With this judge, tenants have to go to court and obtain an order to stop the possession action, otherwise it happens automatically.  And this judge doesn’t readily give the benefit of the doubt to someone who has already received umpteen notices about the foreclosure case over the past two years.  So in all but rare circumstances, we have automatic possession of the home within several days of getting title.

However, a different judge, in the same circuit, will not allow the Clerk to issue a Writ of Possession until the buyer of the foreclosure property files a motion, and the judge holds an evidentiary hearing. And then this particular judge is very sympathetic, labeling anybody in the home a Tenant, entitled to at least 90 days notice, even if they don’t meet the definition (you know…. somebody who is actually PAYING RENT…).  So you may not get possession of the home you bought for 3-4 months after you expected.  Hope you weren’t actually trying to make a profit on that foreclosure…

Same circuit.  Different judge.  VERY different results.

We also often face objections to the sale.  The borrower has one last chance to save their home, and they use it regularly.  In Florida, the law allows 10 days for pretty much anybody associated with the case to object to the sale.  Legally, the objection is supposed to be about a technicality of the sale itself- like the published notice had the wrong date… or wasn’t published at all. In practice, the borrower isn’t objecting with a valid reason… they are just buying time.

Again, different judges will deal very differently with these objections.  One foreclosure judge in our circuit will overrule a defendant’s objection the same day it hits his desk… no response needed, and no delay at all in getting title or possession.  But another judge requires a hearing on every objection, and for some reason this judge’s docket is always full (with objection hearings?)  So depending on the judge, you face a delay of a month… or no delay at all.

Different judges will give you very different results. Judges have wide latitude and discretion in deciding the issues involved in a foreclosure case, because these are cases heard in equity.  So a judge’s sense of fairness really comes into play.   And the judge assigned to your case can be the difference between making money and losing money on a particular property.  So know your judge.


10 Commandments of Foreclosure –PART THREE–

#7- Know thy Repairs

#8- Know thy Exit Strategy

#9- Know thy Buyer

#10- Know thy Closer




The 10 Commandments of Foreclosure — Part 1

So… ready to buy your first foreclosure?  You have your list of sales.  Money is lined up.  You’ve gone to the sale a few times.  You are ready to take the first step to becoming a foreclosure investor.

Not so fast.

10 Commandments of Foreclosure

First, you need to learn the “10 Commandments of Foreclosure“.  Not exactly written in stone, but ignore these rules at your peril:

  1. Know thy Process
  2. Know thy Property
  3. Know thy Title
  4. Know thy Parties
  5. Know thy Occupant
  6. Know thy Judge
  7. Know thy Repairs
  8. Know thy Exit Strategy
  9. Know thy Buyer
  10. Know thy Closer

We will tackle Process, Property and Title in Part One.

In Part Two we will address Parties, Occupant and Judge.

Part Three will walk you through Repairs, Exit Strategy, Buyer and Closing.

When we are done with this series, you should be fully prepared to bid at a foreclosure sale… or you should be too scared to bother.  Either way, here’s what you need to know…

10 Foreclosure Commandments Part One

#1 – Know Thy Foreclosure Process

I invest in a judicial foreclosure state – Florida – and this post (and this entire site  for that matter) is based on that experience. Every state has a slightly different foreclosure process.  The major difference depends on whether the state uses mortgages or deeds of trust when a property is purchased. Usually, states with mortgages use judicial foreclosures, while states using deeds of trust have non-judicial foreclosures.

Judicial Foreclosure

Judicial foreclosure means exactly what you think it means– a judge rules in a court action.  When a borrower is in default, and the lender has decided the default won’t be cured, a lawyer gets involved.  The lender’s lawyer then files a law suit (the foreclosure case) and a lis pendens (public notice that the property is involved in a pending law suit).  The lawsuit then proceeds in accordance with the state foreclosure statutes, court rules and rules of evidence.

In Florida, the lis pendens is the first notice that a property is in foreclosure.  Old real estate books talk about contacting the owner when the lis pendens is filed.  That’s a high volume, low yield approach in today’s market, but if you are persistent, you can find deals, and you will find them earlier than anybody else.  Just treat them like short sale leads- not as foreclosures.

A judicial foreclosure can take as little as three months.  In reality, we regularly see cases filed three or four years ago.  As the banks start to unload their shadow inventory, move past the Robo-signing scandal, and the market recovers, the time for judicial foreclosure should drop back to under twelve months.

Non-Judicial Foreclosure

Non-judicial foreclosures are based on deeds of trust.  The deed of trust provides that the trustee has a power of sale.  This clause lets the trustee start a mortgage foreclosure without having to go to court.

The trustee is typically required to issue a notice of default and notify the trustor (borrower/homeowner) accordingly about the default. If the trustor does not respond, the trustee then initiates the steps for conducting the mortgage foreclosure sale of the home.

The Sale

The court oversees the entire foreclosure process, and once the lender has proven the default, a final judgment is entered and a Notice of Sale published.  The Final Judgment gives the borrower one last chance to pay the loan off, and if that isn’t done by a specific date, the property is auctioned by the Clerk of the Court.  So your first step is to fully understand the clerk’s process.

Most of what you need to know about the sale process is on the Clerk’s website.  If not, go to the Courthouse the day before, and ask all the questions you want.  DON’T be the ass that holds up the sale and costs a room full of people valuable time by asking a series of stupid questions at the start of the sale. (If your mom told you there is no such thing as a stupid question, she was flat out wrong…. a good question asked at an inappropriate time is stupid, right?)

So at a minimum, you need to fully understand the answers to the following questions:

  • Are auctions online or live?
  • Do you have to register to bid?
  • How much is the deposit?
  • How long you have to pay the balance?
  • What forms of payment are permitted?
  • When you will get a receipt of the sale?
  • When you will get title?
  • What can hold up title?

That last point is probably the most important.  For some reason, people think they own the house the minute the sale is over.  Not necessarily.  In Florida, the borrower still has a right of redemption up until the time the Certificate of Sale is filed by the Clerk.  So if you have until 4:00 the next day to pay the balance, but the borrower pays it off first, you won’t get the property. You must know your state’s right of redemption.

Also, most states allow objections to the sale process. For example, if the lender’s representative misunderstood the bidding instructions and let the house go way too cheap, the lender will object to the sale.  Whether they win or not is a completely different story (actually… that’s a whole book).  But ANY interested person can object.  We’ve had objections from the plaintiff, the borrower, the tenant, a guardian, a lienholder… and ALL of these objections delay your title and possession of the property.

Also, be aware that the borrower may be waiting until the last minute to file for bankruptcy protection.  If a suggestion of bankruptcy is filed in federal court before your Certificate of Sale…. the sale is void and you don’t get the property.  Or even more nasty… if the bankruptcy is filed AFTER your sale receipt but before you get title, you may have to go to the bankruptcy court for relief from the automatic stay of bankruptcy.  In other words, you paid for the property, but you might have to wait a few months to kick the owners out.  That really kills your return on investment if you are borrowing money or planning a quick flip.


#2 – Know Thy Property

Now you need to analyze each property to decide what you are willing to pay.  Small time investors pick just one or two properties.  That’s a mistake.  A real investor is going to analyze every property being sold… or have a good reason for not evaluating a specific property.  In today’s foreclosure environment, the vast majority of purchases are made when the lender discounts the mortgage.  And predicting which lender/servicer/trustee is going to discount a specific property is guesswork.  So if you want to buy, you better be ready to act on every single property.

Everybody has their own way of analyzing a property.

You can’t know too much about the property.  Impossible.  Gather as much data about each case file as you can.  I always get the following for each property scheduled for auction, at a bare minimum:

  • Address
  • Tax ID number
  • Tax assessed value
  • Zoning and Land Use
  • Construction type
  • Square feet living space
  • Square feet other space
  • Other structures or improvements
  • Number of bedrooms, baths and garage bays
  • Annual tax bill
  • Septic/Well/City Water/Sewer
  • Outstanding property taxes
  • Is the property listed on MLS?
  • Property Condition and Quality
  • List of needed repairs
  • Any Open Permits
  • Who built the home?

Most of this information is in the court file (especially the Final Judgment and Notice of Sale), or the property appraiser, tax assessor, building department, zoning office, utility companies, etc.  The rest requires a site visit– a visual inspection of the property before the sale — especially the property condition and repairs.

Google Map’s streetview is great for eliminating properties, but since some of the maps are really out of date, you can’t rely on it for deciding a property is in good shape.  Nothing really substitutes for a site visit.  Streetview won’t show you a missing AC, foundation cracks, or other problems.  But it may give you enough information to decide it isn’t a n interesting property or neighborhood.

#3 – Know Thy title

Almost every foreclosure comes with a huge caveat: title is not guaranteed or warranted.  Not at all.  There is no assurance the foreclosure sale is going to give you anything other than a sale title.  And there is no assurance you will get possession of the property, even after you own it (See the next post on Know thy Occupants).

In a perfect world, the foreclosing attorney has named all other lien-holders, and the final judgment has wiped out those liens.  However, only fools rely on the foreclosure case to give clean title. So you need to research marketable title (or have a title company or lawyer search it for you) before buying the property at the foreclosure auction.  Start by making sure you are bidding on a first mortgage.  Then pay special attention to:

  • Code enforcement liens
  • IRS tax liens
  • Criminal court cost liens
  • Creditor judgments
  • Unpaid Taxes
  • Superior mortgages
  • HOA or Condo liens
  • Adverse possession claims

You need to learn to search title yourself.  Or hire someone.  Or grow your business to the point where you hire an assistant who does it.  Title companies and lawyers are not going to return your call when you ask for 20 title free title searches.  But you simply can’t take the risk of buying without a search.

The Casefile

Title problems are my favorite “stick”.  And my favorite title problem is a procedural issue. The Noob that has been coming and getting more aggressive with bidding against me (or piggybacking) is a prime target to stick with a hard-to-spot procedural title problem.

When I’m hunting for a stick, I take the time to read the whole court file.  A surprising number of judicial foreclosures have procedural defects.  Someone didn’t get properly served.  An estate required a guardian ad litem.  All of these procedural problems will be hard to spot… and generally ignored.

How do I use those details to stick? Well…… actually, no….. I think I need to keep some of the fun parts  secret.  Let’s just say that if you are the Noob and you are bidding against me or piggybacking on my bids, you might want to take the time to read the entire case file… very carefully.

–Dave Midgett



10 Commandments of Foreclosure –PART TWO

#4- Know Thy Parties

#5 – Know Thy Occupant

#6- Know thy Judge


10 Commandments of Foreclosure –PART THREE

#7- Know thy Repairs

#8- Know thy Exit Strategy

#9- Know thy Buyer

#10- Know thy Closer