How to Profit from Foreclosures

Posted by: Chris Palmeri on April 5, 2007

With headlines of higher default rates for subprime mortgages a daily occurance is there a way to profit from other people’s woes? Yeah, there is. The folks at Yahoo.com have just teamed up with RealtyTrac, a service that compiles foreclosure data, to launch a new feature (http://realestate.yahoo.com/Foreclosures).

You can type in a city or better still a zip code and pull up houses that are in foreclosure. It will give you the outstanding mortgage balance, the square footage and the number of bed and bath rooms. The same service is also available at RealtyTrac.com itself. This free feature does not include the really important info—the exact address on the street—although if you’re familiar with a block you can probably figure that out because they do provide a map. RealtyTrac is offering a free seven-day trial. After that it’s $49.95 a month.

Be warned. Getting from there to actually buying a home in foreclosure is very long haul. Getting the address allows you to write a letter to the owner asking if they’d like to make deal. RealtyTrac even offers “e-post cards” you can send the owners. The reality is that many people in this situation do not face reality and will hang on to their home until they are literally carried away. By then plenty of other sharpies will be competing for the property. Still, you’re more likely to get a deal from a distressed seller than you are in the bidding wars of yore.

Reader Comments

Kaushik Sirkar

April 5, 2007 7:27 PM

Foreclosures are a risky business. There are professionals who make a fine living purchasing them, but there are soooo many pitfalls for the novice...I've heard a lot of horror stories...

Kaushik Sirkar, Chandler, AZ Realtor®
http://www.homesphx.com
http://www.activerain.com/blogs/ksirkar

Michael Shorey

November 4, 2007 5:48 PM

With any investment there are risk. "a fool and his money are soon parted" And the same is true for foreclosure investing. The fact of the matter is that there are a lot of great deals out there if you are willing to pay for the proper information and work with a professional investment firm.
No risk, no reward.

Ryan W.

October 28, 2008 3:43 AM

Make sure the house doesn't have leins against it and so forth. Big pitfall. I don't understand why it wouldn't be better to just deal with the bank. Few people have an economic incentive to sell an underwater house and take a loss when they could just walk away. But a bank would have an incentive to sell for cheap.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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