So, you just want to buy a foreclosure? You want it to be "simple and easy", and at the same time, "a great buy"? So you ask, "What's the best way to buy a foreclosure?"

I wish I could answer with "it's easy, just do this..."

But I'm sorry; I'm just not going to lie to you. (Side Note: You won't see me on late night television touting my "simple, easy way to buy a house for pennies on the dollar". I sometimes wonder how those gurus sleep at night.)

To begin, the key to ANY great buy is a motivated seller. Simply put, a motivated seller is someone who wants your cash more than they want their house. This also means your seller wants to sell more than you want to buy. Once you have a motivated seller, you are half way to your goal of buying a house at a price below market value.

Foreclosures.com Active List Subscribers receive all new foreclosure property data of all three kinds of "motivated seller" leads:

1. "Pre-Foreclosures" (Notice of Default or Lis Pendens filed) are owners "in default on their mortgage". This is also known as the first foreclosure notice. Based on the State they their house resides in the owners have a set amount of time (varies from 3 weeks to 12 months) to remedy their problem (which includes selling their home) before their house is scheduled for foreclosure auction.
2. "Foreclosure Auctions" (Sheriff or Trustee Sales) are the upcoming foreclosure sales. This is also known as the second foreclosure notice. (In some states they skip the pre-foreclosure notice and use one Auction notice to announce the default and future auction date all in one notice.) The one foreclosing lender sets the auction opening bid at the unpaid balance, plus penalties and fees for their defaulted loan. The auction date and time can, and oftentimes will, be postponed by mutual consent.
3. "R.E.O.s" (Real estate owned") are properties that have been foreclosed and "repossessed" through a prior foreclosure auction and now the lender owns them as non-performing assets. All junior loans and liens are wiped out by the foreclosure auction. Senior loans foreclosed are owned free and clear by the R.E.O. lender, who will seek to sell these properties and minimize losses.

So, which of these three ways is "the best way" to get a deal? Well, it's really up to your market conditions and your investment goals. I'll spell out the ground rules for each and then you decide.

1) Pre-Foreclosures:

Once a Notice of Default (or Lis Pendens) has been filed, the owners are now "in foreclosure" and must do something, or risk losing their property, their equity and their credit, through a foreclosure auction.

At this initial stage, you will need to contact these distressed property owners directly to discuss purchasing their home by paying cash for their equity. Equity is the difference between their Current Market Value and their Loans/Liens on their property. "Search by Equity" is easy to do when you are Foreclosures.com List Member (it's our cool exclusive tool).

Equity is critical, as if the seller has no equity it is a Short Sale which changes everything. Read the pros and cons about "Short Sales".

The benefits to the seller with equity for your pre-foreclosure offer include:

• Set Sales Price (versus unknown price when it goes to auction)
• Cash for their Equity (versus possibly none when it goes to auction)
• As Is Sale (versus repairs and inspections that a normal deal brings)
• No Loan Contingency (versus appraisal and loan contingencies that can blow up a deal)
• Quick Close (6 days versus 30 days normal deal)
• Stop the Foreclosure (versus loosing to auction)
• Bring their Loans, Liens Current (versus loosing to auction)
• Improve their Credit (versus ruined credit from auction)
• Get a Fresh Start (versus skeletons in the closet from an auction)

There is a lot you can do wrong, such as insult or offend them with patronizing comments like "how did you get in such a mess?" or "Why in the world did you do THAT?" Do read more about this in "What to Say and NOT to Say" and "Showing You Care with the Right Questions". You must show them how your offer is a "win - win" proposition for THEM (not just you)!

If they are not ready to sell yet, do discuss their "options" to help them keep their home. Read the details of all the Sellers Options. You won't make any money this way, but you will "pay forward" your good Karma bank. Keep the door open for future discussions. You never know when someone in foreclosure will decide it's time to sell his or her home. But when they do decide, you want them to talk to YOU and no one else. This relationship must be established early on, starting with your first contact, and reinforced through your repeated follow-up visits.

One of the top reasons investors do not succeed in buying pre-foreclosure houses is they simply do not follow up! Do not make this mistake! Please read "Top 10 Investor Pitfalls to Avoid" for more on the subject of failure.

Once the homeowners agree to sell you their home, you will "do the math" to determine the MOST you can afford to pay for the property, BEFORE you meet with the sellers. Make sure you have enough cash available to make up their back payments (and stop the foreclosure), plus give them some "walking money" for their equity, so they can get their fresh start.

The amount "of cash" you give the seller for their equity is totally based on your negotiation skills. Read more about "Winning the Objections Game". Obviously less is better from your profit standpoint -- but too low is not good either. The seller does need enough money to move and get their fresh start. Plus you don't want to get your offer rejected outright and NOT buy their property at all. So, again, it's about the win-win deal.

Make sure your offer is contingent upon and "subject to" you taking over all their existing loans, liens, etc. as listed in your purchase agreement (and that it is the entire list of all debts). Make certain that the terms for repayment are accurate, and that you have the right to approve or disapprove the current status of all loans and of title.

Successful foreclosure purchases must conform to your state foreclosure laws. Do make sure you read up on, and are familiar with, your laws in advance of writing your offer. Normal purchase agreements include full title insurance as well as the buyers' complete inspection of the property's physical condition.

The best part of buying directly from the owner is that you have an EXCLUSIVE deal. Contrary to popular belief, there is RARELY ANY COMPETITION when you buy a home in foreclosure, directly from the owner. (Less than 20% of the houses listed in our "Pre-Foreclosures" or "Auctions" tabs are also listed in the MLS. I know. Big surprise.)

Once an owner in foreclosure decides to sell his property he just wants to get it over with quickly and easily. The idea of the seller calling many investors to get the best offer just isn't consistent with reality. This is just too painful of a process for them to talk to folks about in the first place. Once you are in -- YOU'RE IN!

And with pre-foreclosure deals with equity, you get to make a difference in someone's life that really needs you. It's a real "feel good" way to run your investment business.

BUYING PRE-FORECLOSURES WITH EQUITY IS MY #1 CHOICE RIGHT NOW FOR 2008.

2) Foreclosure Auctions:

In two notice states after the initial Pre-Foreclosure notice is filed a few weeks (or in some states a few months) later the Foreclosure Auction is published. The lenders representative (Trustee or Attorney) files an "Auction Notice" (Trustee's sale or Sheriff's auction) of intent to sell the property to the highest bidder at a public sale, with the date and time of the scheduled public sale. The opening bid is based on the balance amount owed on the loan (including principal, interest, late charges, penalties and foreclosure fees allowed by law), as of the scheduled date set for the auction.

Oftentimes the auction is delayed by mutual consent and a new auction date is scheduled. You must call the lender's representative (Trustee or Attorney) the morning of the auction to confirm the date, time and minimum opening bid -- as it will change.

Before you attend any foreclosure auction, you'll need to complete a ton of advanced research. Foreclosure Auctions are "as is" with no warranties, no inspections and no title insurance provided. In most states you need "all cash" (in the form of certified funds) to qualify to bid. You will need to read your States Foreclosure laws to know your bidding requirements.

You must do a "complete title search" to examine the state of title and to determine what position you are bidding on at the auction. You can do this yourself (expect NO help from the County Clerks) or you can hire someone to do it for you. A reputable title officer charges $300-$400 for each preliminary title report they complete (these are NOT the same as a "property profile" which is FREE and worthless to you). Read more about "Your Fastest Way to Find What is Owed".

Title research will be very costly, especially when you are not the winning the bidder on many houses. Most professional foreclosure auction bidders are "senior investors" who have a lot of money and enough resources to hire staff to assist them. They have perfected the science of title research and have delegated this very tedious task to their staff.

Why do you need title information?

If you are planning to bid at a foreclosure auction for a "first mortgage" most junior loans/liens will be wiped out and you will not be responsible for them. This is great news if the owner in foreclosure had a ton of loans and not enough equity for you to be able to purchase from him directly. Now you have a chance to buy the house, for less money, at the auction!

BUT some liens are NOT wiped out from a First Mortgage Foreclosure (such as Property Tax Liens and Federal Tax Liens, etc.). This is very important information for you to know as the bidder.

What if you are planning to bid at a foreclosure auction and you thought that opening bid of $50,000 sounded GREAT on a $200,000 house? You may be GRAVELY MISTAKEN. Your $50,000 winning bid could be for the "second mortgage" instead. The winning bidder at this auction pays the $50,000 cash and then AUTOMATICALLY ASSUMES the debt of all SENIOR LOANS/LIENS on the property.

What if the first mortgage on this house was $200,000? OOPS! You just paid $250,000 for a house worth $200,000. OUCH!

You will also need to inspect the property to determine the amount of repairs needed. If you are buying from the owner directly you are invited inside and can easily do your inspections. But what if the owner losing his home at the auction is hostile, and won't talk to you, or let you in? Are you prepared to peek inside windows and hope for the best? What if the house is totally wrecked when you finally buy it?

You can also expect competition at the foreclosure auctions. This is not an exclusive deal. Any investor with money will go to the auctions to bypass dealing with the owners in default. Oftentimes there is a crowd of people who may bid on the same property. That will only push up the bidding well over the minimum bid and increase the price you need to pay to get the property.

Lots of cash, resources and risks of loss reduce my interests in auction investing. Do Read "Foreclosure Auctions: Buying at the Courthouse Steps".

BUYING AUCTION PROPERTIES IS MY #3 CHOICE RIGHT NOW FOR 2008.

3) R.E.O. (Real Estate Owned):

R.E.O. (real estate owned) properties are the last of the 3 Stages of the Foreclosure Process. These properties went to sale at foreclosure auctions but there were no outside bidders, so the defaulted auction winner is the foreclosing lender. This is the way that lenders take their collateral in exchange for their defaulted loan. The lender no longer has a bad loan to collect on - they now have a property that is a non-performing asset and which they must sell.

In the last few "hot real estate market" years R.E.O. lenders have fixed up and listed their properties for full market value on the MLS (multiple listing service by agents). The R.E.O. lenders were essentially OUR competition.

But once lenders foreclosures started skyrocketing in 2007 they could no longer keep up with the fix and sell plan. (Read more about foreclosure statistics in our "Nationwide News" articles.) They have started to sell some of their R.E.O. properties "as is" for a discount again.

R.E.O. lenders in SOME PARTS of the country are once again motivated sellers. Some lenders have a ton of bad loans and a large R.E.O. inventory which they need to unload.

Finally, R.E.O. Investing is BACK for 2008!

Check the R.E.O. property listings for your area and see if it is listed on the MLS. If it is on the MLS contact the listing agent and ask questions about their R.E.O. lender seller. If it is NOT on the MLS you will need to contact the lender's asset manager directly. Ask for the head of the R.E.O. Department or request the name of the actual R.E.O. asset manager handling this property.

To expedite your R.E.O. Contacts research use our exclusive "R.E.O. Key Contacts Directory" which has just been updated and now available as a free bonus in my new "Seven Steps to Mastering Foreclosures in 2008" all new home study course.

Ask the lenders asset manager (or listing agent) if the bank will be selling the property "as is" and if they will discount for an "all cash offer" and a quick sale to an investor. If you get a YES, then that's great! Continue to pursue the property and work on lining up your money (lender or equity partner).

Make sure you've structured the deal so you do not exceed 65% (our soft market formula) of the current market value (less repairs) and you will have no problem finding money partners. Read "What Does it Really Cost" for more on setting your offer price.

Buying R.E.O. properties is all about building long term relationships. Do this right and your relationships will start bringing YOU deals. And that's a Great Thing!

BUYING R.E.O. PROPERTIES IS MY #2 CHOICE RIGHT NOW FOR 2008.

Which Way is the BEST WAY for YOU to Buy a Foreclosure?

As you can see, I prefer working with owners in pre-foreclosure with equity, giving those owners cash for a fresh start and making a difference to someone who needs me. My second choice is working with banks, as building relationships with just a few key people can bring you many deals. And isn't working less and making more your long term goal for 2008? I hope so!

Make sure you check out my all "Seven Steps for Mastering Foreclosures for 2008" home study program. This is our BRAND NEW Exclusive Step-by-step System for Closing Great Deals in Any Market. It is my professionally recorded audio program with course outline, contracts and forms, with all the newest foreclosure investing information available anywhere. You'll get timely down to earth instructions on how to make huge profits in the foreclosure investing business (even in today's soft market) without needing cash or credit of your own. Check it out...

Happy investing in 2008!
Alexis