Finding Underwater Properties

How do you find over-leveraged (i.e. “underwater”) properties?

It is possible to help homeowners who owe more on their property than what it is worth in today’s housing market. These homeowners do not have to do a short sale in order to sell their property. Another option may be to use Ron LeGrand’s “ACTS” (Assignment of Contract and Terms System) program, whereby the Seller offers the property for long-term lease to a Tenant/Buyer for terms that cover the cost of their mortgage, taxes, principal and interest, in exchange for a growing portion of equity when they convert their lease to a purchase.

But how does the investor find these Sellers? Most people do not talk about their financial issues, until they have decided to do a short sale. This is more common since the economic downturn a few years back, and is associated now with much less guilt or shame.

But in order to offer an alternative to a short sale, the investor must find these properties BEFORE a Seller commits to doing a short sale.

Many investors target underwater properties, by sending letters to homeowners who purchased their homes between 2004-2008. It is very likely that anyone who purchased a home during this timeframe almost anywhere in the country, is underwater on their mortgage. So a direct mail campaign can be targeted at homeowners who purchased their homes during this time with mortgages. A list of such targeted properties may be obtained from a local title company.

If the investor has a local real estate broker on his/her team, the broker will have access to their Multiple Listing Service. The NWMLS has property information in a program called “Realist,” which brokers can access with a tax id number for the property. Realist is a program of Core Logic, and compiles data from MLS and county records on both on- and off-market home sales. Realist shows the date when recorded mortgages were taken out on the property.

Realist will not show whether the mortgage is a first or second mortgage, or a revolving line of credit like a HELOC (Home Equity Line of Credit). It will not show whether the mortgage has been paid off. But it will give an investor an indication that there may be a current mortgage on the property, and what the dollar amount of that mortgage was at the time of origination.

Is it possible that properties that were purchased prior to 2004 are also underwater, even homes that have been owned for more than ten, twenty or thirty years? Yes, indeed it is.

Many homeowners used their homes like ATMs to pull cash out for consumer goods during the boom years of easy credit. They wound up with over-leveraged properties when the market changed, and may also be candidates for either a short sale or short sale alternative.

So be sure to include a local broker on your team, if you are looking for over-leveraged properties to purchase for your portfolio. If you would like to know more about alternatives to doing a short sale, please message me privately at HomeLandInvestment@gmail.com or leave a recorded message at 888-621-4999.

Happy Investing!

Wendy Ceccherelli has been a full-time real estate investor since 2006, and is the designated broker /owner of Home Land Seattle. She is also a principal with Van Gogh Development Corporation, developer of Van Gogh Studio Lofts, a transit-oriented development at the Rainier Beach Light Rail Station in Seattle. Prior to her career in real estate, she spent twenty-five years as a government arts funder.