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.
