READ THIS!

 


Ok, lets get down to some basics of foreclosure data. Remember the old computer saying "garbage in/ garbage out". It is still true. I am not saying that foreclosure data is garbage but there is some interpretation required. You need to understand what it really is and what you want to do (and particularly don't want to do) with it.

Using the proper techniques, you will find it unnecessary to merge large amounts of data. Good foreclosure data is your basis. You will reserve your attentions for the real property deals that the professionals do everyday. This is best done by YOU and not a flashy computer program. Sounds pretty strange coming from a programmer doesn't it? The truth is, I am first an avid foreclosure investor and secondly a programmer (well third really, I am also an aerospace engineer).

I know when I started out, I was looking for that "silver bullet" too. Well, I expended a lot of energy (without picking up any good deals) until I discovered some of the simple techniques that opened up a whole new world for me. It is pretty hard to learn these techniques without help. At least you can save a huge learning curve by listening to the professionals and taking their advice. If you aren't sure what you are looking at, then ASK! Please!

The best Southern California foreclosure data is unquestionably County Records Research data. They offer unlimited foreclosure consulting to their data customers and also provide a free monthly seminar by one of the top investors in the area. In my opinion, this is the best way to jump start your business and improve your techniques. CRR can be reached at (800) 664-2567.

The other day, a lady called and asked me what "field" in the CRR default (County Records Research) database contained the amount owed on the property. After some giggling (sorry...), I tried to explain that there wasn't such a field in any database. Actually, here is how you determine what is owed on a property (if you really must know):
 

Add up all that stuff in the foregoing steps and you have an idea of what is owed on the property. Simple isn't it (ha.. ha...). I am sure your computer can guess at all that stuff and get a good answer (NOT!). Since that was so much fun, lets go on to comparables (value of the home based on recent sales of comparable properties in the area within the last six months).

The next step would be to get comps for the properties. If you are going to rely on your software to pick the "winners" for you, then you will need lots of "comps". Here is how you do that:
 

Well, if you are still with me, you might be asking, why can't I just order the comps automatically and be done with it. Well, I guess you could try that if you really wanted to, but please read on. First, computed comparables are very expensive if you need loads of them and secondly, they aren't very accurate. If you are still wondering, go out and comp some properties manually and you won't bother to ask about that any more.

So, you might be starting to see the point here. In order to get your computer to "search out equity" in properties, you first have to massage the data in a very big way. Nothing about that is "automatic". That would be far too error-prone to be of much use at all. Nobody I know does that (and I know very many highly successful professional investors).

Let me explain where I am coming from. Through my software support, I  meet what must be hundreds of investors. Many of them I provide with technical and/or investment help. Some of these contacts don't need much help though. One made nearly two million dollars (net) turning properties last year. Another one did just about as well. Of course, there were a large number in the ranks below that amount. And I repeat for emphasis, nobody I know trusts mass computed comps and computer searched equity data. It just doesn't work as well as you might think. Please read on...

A Few Fallacies

Scanning computer data can find property equity: Computers can do a fair job of finding theoretical equity. Spending theoretical dollars could be tough though. So, I suggest looking for REAL equity. Property liens and many other factors are hidden from normal data sources. There are also many errors and duplications in the public records, previous loans nor reconveyed but actually paid off, largte cross-collateralized loans where only part of the loan has to be dealt with, etc... You have to understand the business and search the data for yourself.  This is not just my idea, the experts at County Records Research will tell you the same thing. They are expert investors themselves and have been producing the finest Southern California foreclosure data for about 15 years. They will tell you that they make more money investing in properties than they could ever make selling foreclosure data.

My computer can locate properties others miss: Please be advised that there are literally hundreds of expert professional investors looking at all foreclosure data on a daily basis. It would be sheer folly for a beginner, particularly, to think they had something others did not. After all, some pretty astute investors don't use a computer at all, just their brains!.

I can buy foreclosures at 40% to 50% off market price: Although somewhat unlikely, several years ago this was sometimes done. Now, however, it is virtually an impossibility in Southern California. The market is far too hot for that. There are numerous "outs" for owners these days. Properties sell so fast that when there is any equity at all, the property can be easily sold and the owner can get very close to market value. Also, it is so easy to get financing now. There really isn't even much of a time factor involved. The owner can very easily get temporary financing to workout a better deal.

If ANYONE is suggesting routinely purchasing properties at these discounts in Southern California, I suggest asking for recent proof. I am speaking of within the past few years. Anyway, If you talk a distressed property owner into selling their home for 1/2 the list price, be prepared for the ride of your life. You don't need to take advantage of people. The court system takes a very dim view of such things. One investor I know spend time in jail for not following the law. BE CAREFUL. If you are not sure, ASK!

My computer program can help me with all phases of foreclosure buying: Not ALL programs can do that. For example, scanning property lists for "theoretical equity" falls very far short of the mark. There are three major ways to purchase foreclosure property: Before Sale, During Sale (Trustee Sale),and After Sale (REO from Lender). Let's look at them one at a time.

Before the sale, there is some benefit in looking for equity. Unfortunately, much of the real equity in the property will be made by properly researching and dealing with a variety of factors. Your computer has no idea of what many of these factors are. You loose! If you learn how to deal with owners in default, and what special circumstances may exist in each possible deal, then you (and  not your computer) will make the deal possible. Starting to see the pattern?

During the sale, there are many factors which make trustee sale properties attractive or not. This requires very specialized training in at the County Recorders Office. Do NOT skip this step. You will not get very far without getting really badly stung if you bypass this education process. You CAN get burned! This is not automatic. Keep in mind too that lenders sometimes offer "deficiency bids" where the minimum bids are actually less than advertised. There is money to be made here and your computer is not going to know. Hmmm.

After the sale (REO) purchase from the lender is by far the safest purchase. Unfortunately, equity means nothing. The lender is going to want a certain price for their properties. It really doesn't matter how much or how little they are into it for. It takes real skill here to structure a good deal from the lender. It can be done, but your computer is absolutely NOT going to do it for you. For this, you are going to be sitting down with a loan VP or the like and hammering out a deal.

I can easily obtain comps from a data service: You have to be very careful here. You must download a number of possible comps from the same tract or APN string and then verify that the properties are indeed "comparable". You must see them. Bulk produced "comps" are not going to be near good enough. That is why appraisers always dump the largest comparable list they can and then drive the area. Sorry...

 

How it is really done
(Without writing a book on the subject)

First of all, most of the really successful investors I know don't chase a large number of properties. Those that do, usually don't do very well. So tip number one is concentrate on a small number of properties. You will have a much better chance of getting them. Select them personally, with an eye for special circumstances, not just apparently high equity. In fact, some of the best properties will appear to have no equity at all. You will become quite proficient in selecting the real deals. Again, forget computer generated comps, "automatic" equity computations, huge savings, and all the other wild claims. This is the REAL world.

Since time is the most valuable commodity on the planet, figure out how long it takes to do a quality job of computing loan values, comps, equity, rehab estimates etc... and work in reverse. In other words, lots of the properties will "drop out" of the running for one reason or another. It is good if you save the most time consuming tasks until the end so that you will save alot of time and energy.

For example, if you only have to drive out and view (and comp) five percent of the properties, you can accomplish twenty times as much in the same amount of time. Why in the world would you want to spend time dealing with properties you can't get? Sort out the business end first. Contact the owner if that is in your plan. It only takes a phone call. If you want to deal with the lender, do that. It is quick. If it looks like you may get the cooperation you need, then proceed with the rest as the need arises. Tip number two, Establish the relationship first! The deal will follow.

A very good example of the benefits of establishing the relationship first: Why jump through hoops trying to find out how much is actually owed on a property. Your calculations are going to be a guess. Simply ask the owner. They are in the best position to be able to tell you that. As simple as this sounds, you would be surprised how many people overlook it.

As you learn the approaches, you will be able to look at the individual properties and determine which you would like to go after. It is important to understand that apparent equity is only one measure of the deal. It is not the only one, or in many cases, even the best one. In many cases, the equity can be "adjusted" by taking advantage of a number of techniques. It may sound pretty silly coming from a computer guy but this is precisely why   you, and not your computer, must seek out the deals.

There is a principal that makes the most successful investors standout from the crowd. They know that the best deals are those that most of the amateur investors won't even recognize. They will tell you that you must learn to look at the data and analyze it yourself. Once you learn the techniques, it doesn't take very long at all and you will find yourself concentrating on the real deals.

One last word on the subject. One of my recent deals net more than $35,000. I hadn't even seen the property before I acquired it.. The deal was done in escrow with title insurance and I used IRA money to do the entire transaction. I was able to price it right so that it sold instantly without even using a broker. The check from escrow went directly back into my IRA (all taxes deferred!), and I now use that money for making hard money loans (yes, I am a lender too). This is what the pros do!
 
 

 

TRUSTEE SALES

 

For those who are interested in TRUSTEE SALES, please keep a few things in mind. First, nobody, and I mean nobody, is getting huge deals at trustee sales in Southern California. The experts agree, the strong market is making for very keen competition indeed. If you are going to be starting out along that path, you need to be very careful. Personal and up close analysis is a must. I guarantee you will loose your posterior if you don't personally research each and every property. There are lots of ways to go wrong. Please don't fall for the hype some software people are putting out. Researching trustee sale properties is time consuming and requires skill. NO COMPUTER PROGRAM can do it properly for you. Trust me on this on. If you think you can "farm" this data for automatic profits, you are dead wrong. I work on deals every day and I help many of the top investors do the same.

Please remember, a huge number of trustee sales postpone every day. Investors typically spend their weekends looking at upwards of 60 properties with the hope of bidding on one or two of them the next week. The prices are generally getting up into the 80%-90% of list price and higher. They survive by buying a property or two a week and flipping it. How do they do it? They have brokers listing dirt cheap and rehab to better than market and trying to flip properties above market price. This is a very dangerous business. These guys have tens of millions of dollars to play with. If they feel like it, they will shred the small investor at the trustee sale just for the fun of watching them squirm. This is what you are competing with. Best to find a niche market and concentrate on it. Most major trustee sale investors target low to mid price ranges and don't want involved fix up. Remember they want to flip lots of properties. Time is not on their side. For this reason. fixers, multi-units, commercial properties are attractive to the small investor

Remember that trustee sales do not wipe out certain encumbrances. Taxes, senior liens, IRS Liens, and others will stand. You and your title company rep will have to sort through these on a one-by-one basis. You will have to research title on these yourself. Forget your computer for this work The few properties you will actually bid on as a beginner will require your personal attention. Remember, when you buy a note at a trustee sale, you may well have to wait several months for possession. You may have to evict the owner, fight a bankruptcy to get them out. You may find hidden defects or other problems making a particular deal a large loss. You must plan for the occasional loss. It does happen.

The IRS can claim a property back for up to 120 days after the sale. You shouldn't spend any money on the property during that waiting period. One major investor I know spent 18 thousand dollars on a rehab only to have the property taken back by the IRS only days before the end of the waiting period. He lost that money.

Are you starting to get the idea? Please be very careful with trustee sales. There are dozens of pitfalls I haven't even mentioned. If you aren't sure if you are ready or not, then you are not ready.

CONCLUSION

 

If you have read this far, you are on the right track. You can now browse some other sites and compare the information. You will have most certainly noticed the complete lack of wild claims, catchy graphics and general hype on my pages. I am very involved in day-to-day investing and I take it very seriously. I run no seminars or clubs. I do make available my very own personally written software to County Records Research for their customers. I use it myself to help me invest in all types of foreclosure properties. The software can help organize your effort, but you are the key ingredient. The software is just your trusted helper.

Foreclosure investing is not a get rich quick avenue. It takes loads of knowledge, experience and fortitude. Oh yes, and your fair share of luck. But if you work very hard at it, there is money to be made and even a reasonable living at some point.

I wish I could tell you that you would get huge profits by simply using some software package or scheme or other. That you were the only one looking at the foreclosure data and the huge profits were there just for the picking. My experience over the years teaches me otherwise. There just isn't a " silver bullet".

The information on my web page is presented to you, the public, as a service. I sincerely believe everything I have said here to be true and an honest representation of the facts as I see them. You be the judge. Study and learn. Ask loads of questions.  If you decide to subscribe to foreclosure data from County Records Research (they really are the best by far), then we will most likely be talking personally. I personally assist their customers with the CRR-Pro program, as well as a wide variety of investment questions.

You can call County Records Research (800) 664-2567 or log onto their web page countyrecordsresearch.com for the best foreclosure data in Southern California and the CRR-Pro software. From thereon, their foreclosure experts can help walk you through the process. Remember, they offer a free monthly seminar and unlimited foreclosure consulting to their data customers. They can supply you with many of the forms you will need and even help you fill them out. Nobody else can offer you so much for so little. And that's the truth.

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