As a real estate wholesaler, our main job is to find potential in the properties we’re buying and selling.
When people hear this, they often think that we’re looking for homes that have been renovated with new features like flooring, windows, furniture, etc. But what we’re actually looking for are the homes that people wouldn’t even give a second glance.
For example, homes with liens or those that have been foreclosed on.
Liens and foreclosures? Jamil, you can’t make offers on those!
Actually, my friend, you can.
But first, let’s look at what each of these things are.
What is a Lien and What is a Foreclosure?
Let’s start with a lien – what is it?
A lien refers to the legal claim against a property, which can then be used as collateral in order to repay a debt. In real estate, a lien gives the holder – like a bank – the ability to foreclose on a property.
Let’s break this down.
When you purchase your home, you most likely get a mortgage that you pay off. While you are the legal owner of the property, you still have to pay the bank/mortgage lender the amount that was loaned to you to buy your home.
As long as you’re making those monthly payments, you don’t have to worry about liens, however if you stop making payments, then the lender/bank can begin the process to put a lien on your home.
Which leads us to foreclosures.
A foreclosure happens when a property is seized and put up for sale by the lender or bank; this is like the reversal of ownership, as the bank/lender now owns the home.
Now there’s a process to foreclosures, which includes pre-foreclosures and property auctions.
Liens and pre-foreclosures can still allow the homeowner to catch back up on their mortgage payments, but for those who can’t or don’t, that’s when the process of selling the property begins.
So now you understand what liens and foreclosures are and a little about how they work, you can start to see how we, as wholesalers, are able to find potential in these homes.
How to Put an Offer on Liens or Foreclosures
Let me say this first – every state is different and every city is different, so what one wholesaler is able to do in one city may not be the same as another wholesaler in another city.
In many cases, properties that have liens or are in foreclosure will have signs or notices on them stating their status and usually have a contact name and phone number where you can call and get more information.
You can also call your city recorder or code compliance – depending on what it’s called in your location – and ask about any liens, citations, code violations, fines, etc that are on the property.
Depending on the violation – and your location – the buyer of the property may be expected to pay for any issues on the property, so make sure you find out all the info you can beforehand!
Putting an offer in works the same way as if you were approaching a seller or realtor, just in this case it might be the lender or bank.
One last thing to remember when making an offer or purchasing a lien or foreclosure – make sure that you add additional terms within your contract. In this case, those additional terms will state that the seller ensures that the following items are paid at or before the closing date.
This ensures that you’re protected and that any buyers are protected from having to pay for any citations, violations, fines, etc, attached to the property. While some standard contracts will have this language, don’t leave it up to chance and put your own specific terms within.
And there you have it!
Liens and foreclosures still have potential, despite the situation that put them in violation, and potential is what we always look for, as wholesalers.
If you’re curious about offering or purchasing liens and foreclosures, come hear from the expert community at Astro. Our members have experience in this and other aspects of wholesaling and always want to help or #squadup.
So what’re you waiting for? Come join us!