Home Foreclosures Insights: Some Personal Experience Reality of "No Down"

Purchasing Property With No Money Down: My Personal Experience
By Mark Barnes

Have you ever seen those infomercials about buying houses with “No Money Down?” They are really well done. They have all kinds of people offering great testimonials about how they have gotten rich, buying rental properties, with absolutely no money out of their pocket. You see this guy, standing on a street corner, talking to someone, and he says, “I own that one,” pointing to a beautiful colonial. “I also own that one next to it, and the one two doors down, and I’ll be closing on the one directly across the street from it, next week.” He then assures us that he has purchased 17 homes in the last eight or ten months, with zero money down on the properties. Plus, in many cases he’s also paid no closing costs.

And, let’s not forget, this same guy is grossing tens of thousands of dollars monthly, and his net worth is nearly one million dollars. So, he says.

Now, all of this looks wonderful, so when the person selling the course that will teach you how to do this, at a nifty price of just $297.00, speaks, you are glued to his every word. “Real estate is the safest and fastest way to make money, today,” the expert will tell you.

So, can this really be done? Can you purchase houses with no money down? Can you become a landlord in as little as one month’s time and start raking in the cash from those rent payments? The answer is an absolute “Yes.” It can be done, and I am proof positive, because I’ve done it. The question you should be asking yourself is not can I buy real estate with no money down, but should I?

You see, this is a question that the guy selling the No Money Down course, with all of his people and their great testimonials hopes you never ask. His advertising and marketing strategy would collapse, if he gave anyone a chance to ask this question, because he would be forced to lie if he answered it.

Rarely is the whole truth anywhere to be found in infomercials, especially when the advertising is about No Money Down real estate programs. The infomercial makes the idea and the program look so easy that any child could handle it. It makes it seem like every American should be doing it, and we’d all be millionaires. But every American is not doing it, and many of the ones who are doing it not only are not getting rich, they are actually going broke. The infomercial won’t tell you this. That’s why I’m here.

The Truth

Now, let’s get started with the truth about buying real estate with no money down and the truth about being a landlord. The first thing you need to know is that they are both very bad ideas. Let me illustrate by using my own experience in these areas. I started buying rental property nearly 10 years ago. The first property I bought was a deal orchestrated by some real estate con artist, who told me I needed just $2,000 to take ownership of this home and, in the process, help out a woman who was about to be foreclosed upon.

In two years, she would clean up her credit, refinance the loan on the house, and I would make $10,000. Sounded good to someone who was quick to buy into anything that returned big dollars in a short time.

This worked for the first year, as the woman paid on time, and I pocketed an extra $100 monthly. Later, though, things began to collapse, as the house began to need repairs, all of which the woman couldn’t afford, so I had to pay for them. I put nearly $5,000 into the house in a four-year period. When I was finally able to sell it, I didn’t quite make back what I had put into it.

Meanwhile, I was eager to overcome this problem by adding many more. A slick mortgage broker got hooked up with an even slicker real estate prospector, and the two of them convinced me that they had a way I could buy houses rapidly, with absolutely no money out of my pocket. Although my experience will probably be enough to enlighten you to the pitfalls of this model and of being a landlord, let me say that I can’t emphasize enough how dangerous buying property with no money down is.

In six months time, I had purchased eight houses – many with loans from the same wholesale lender. These lenders should have been concerned with all of the debt I was building, but they kept approving loans, based on my good credit and rents covering the mortgage payments. One of the biggest problems, which I was not experienced enough to detect, was that most of the rents were just $50 to $100 above the mortgage payment.

“Don’t worry,” the investor/ hustler would say. “You’ll make all your money on volume. We’ll get you into 30 or 40 houses, and you’ll be pocketing $4,000 to $5,000 every month.”

As you might imagine, my mind raced. I was making the huge deposits at that very moment. My bank account was fattening up at breakneck speed.

The Illusion

This is what people who buy houses, using the No Money Down plan envision happening. After all, if you can buy one house with no money down, why not five or ten or fifty? For some reason – the vision of the dollar sign, most likely – I failed to seriously consider the maintenance of these houses, the possibility of missed rent payments, and the chance that renters might actually stop paying, altogether, forcing me to evict them – a time-consuming and extremely costly undertaking.

As you may have already guessed, all of these things happened to me, after I had amassed 26 rental properties. In fact, oftentimes, all of these problems happened in the same month. Now, for awhile (when I had about 10 houses), if one person failed to pay rent, I could cover it with the nine other payments. But when two, three and sometimes even five tenants didn’t pay in the same month, it was devastating to my business. I had to go to my business account and pay up to $3,000 at a time in mortgage payments, with no income to cover it. Plus, I had to pay a property management company to get my tenants to pay or to evict them.

Soon, this became the norm, not the exception. There were constant problems at my houses. Unhappy tenants led to poor upkeep of the property and even more maintenance problems. About one year, after I had amassed 26 houses, I was having problems with roughly 10-15 houses and/or tenants each week. I was evicting at least two tenants each month, and approximately four to seven tenants were either behind on rent or not paying at all. Promises were made, payment plans arranged and few, if any, ever followed through.

It didn’t take long for me to realize that this was no way to make money in real estate. Consequently, I got rid of these houses as fast as I possibly could. There were plenty of buyers, willing to take over my headaches, because they had the ability to make it work, they believed.

In 10 years of being a landlord, I lost thousands of dollars and likely took some years away from my life with all the stress I had endured. So, whatever you do, avoid the No Money Down Trap. There are much better, still inexpensive ways to make money in real estate.

Learn the best ways at www.winningthemortgagegame.com

Mark Barnes is author of the wealth-building system, Winning the Mortgage Game and other investment real estate books. He is also a suspense novelist, and his new novel, The League, will thrill both suspense and sports fans. Learn about Mark's wealth-building system and get his free home loan course at http://www.winningthemortgagegame.com. Learn more about The League and read an excerpt at http://www.sportsnovels.com

Article Source: http://EzineArticles.com/
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Buying a Home Foreclosures- Buying a home foreclosures makes you generate quick profit. Step-by-step process in buying a home foreclosures for quick cash.

City Resourceful Way of Dealing with Home Foreclosures

City uses foreclosure as club, and 6,000 pay
By BRIAN MEYER
News Staff Reporter
6/3/2005


About 6,000 property owners who were behind in paying city taxes and fees have settled the debts to protect their homes from hitting the auction block in October.

But 5,460 delinquent taxpayers remain on the foreclosure list, and they received certified letters a few days ago, warning that their properties will be put up for sale if they do not make payments.

For the first time, the city is using the foreclosure process to collect delinquent garbage user fees, water bills and sewer charges. In January, about 12,000 properties were delinquent in paying at least one city charge, including property taxes. As of Thursday, the list had been cut in half, a fact that officials attribute to the new get-tough offensive.

"The public has to get acclimated to the fact that the city is serious," said Bruna Michaux, assessment and taxation commissioner.

Still, Michaux said, the city will work closely with the Legal Aid Bureau of Buffalo and Legal Services for the Elderly to try to help individuals who are facing legitimate hardships. The groups can help low-income residents to try to obtain court orders delaying foreclosures. Michaux is arranging a meeting with agency representatives to discuss the plan.

"While we're coming down with a hammer, we also have to be sympathetic to those individuals who are experiencing true hardships," she said.

Athena McCrory, staff attorney in the housing unit at the Legal Aid Bureau, expects to see an increase in the number of people who will seek the agency's help. She also is worried that some individuals might turn to unscrupulous lenders who charge excessive interest rates or impose unfair terms.

"We don't want people to get predatory loans to pay their bills," she said.

The city plans to make people aware that they can seek to represent themselves in court if they do not have money to hire a lawyer but have incomes that make them ineligible to obtain free legal services.

People had until late January to make payments without incurring a $439 foreclosure fee. McCrory said the additional charge makes it even more difficult for some people to settle their debts.

The auction will be held Oct. 24-26 in the Convention Center. A third day has been added to accommodate what City Treasurer Michael A. Seaman thinks might be a record number of foreclosures. Some officials expect between 2,000 and 3,000 properties to remain on the sale list.

"The most I've ever done is about 1,700," Seaman said.
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Buying a Home Foreclosures- Buying a home foreclosures makes you generate quick profit. Step-by-step process in buying a home foreclosures for quick cash.

Home Foreclosures Intriguing News

Firms flip homes, stave off foreclosures

Stephanie Paterik and David van den Berg
The Arizona Republic
Jun. 1, 2005 12:00 AM

Joe Nee of Chandler knows what it's like to stand on the brink of foreclosure.

Six years ago, he fell behind on his mortgage payments after getting laid off from a job as a construction superintendent in Las Vegas. Nee put his house on the market in desperation and sold it a week before he would have foreclosed.

"It's not hard to fall into," he said. "I was really embarrassed about it."

That experience propelled him to move to Arizona and start Flatland Investments, which operates www.soezhomebuyer.com and www.soezhomeseller.com. He scoops up houses from people who need to sell in a hurry, and says he gives them about 85 percent of the market value.

More and more, those customers are selling to avoid foreclosure. They are as many as five months behind on their mortgage payments, their houses are usually in disrepair and they are weeks if not days away from losing the property.

"Unfortunately, my most common customer is people behind on payments," Nee said. "They don't want to believe it or look at it and then they come to me at the last minute. I do charge money to drop everything and go put out that fire."

Recently, Nee said he bought a home for $155,000 that was appraised at $170,000. He made repairs and sold it for $177,000.

Nee said his fees are comparable to what people pay to sell their house through a real estate agent, considering the cost of repairs, inspections and commissions. He said he takes care of back-payments and fixes up the house. That can range from $500 for paint and decorations to $10,000 for remodeling, depending on the house's condition. In this market, he is quickly flipping the properties for profit.

Around the southeast Valley, foreclosure rates have dropped sharply. In Gilbert, foreclosures dropped 40 percent from 2003 to 2004, and in Higley, foreclosures dropped 25 percent during the same period, according to Infocom, a Phoenix-based real estate data company that compiled the data for The Republic. In Chandler, Tempe and Mesa, foreclosure rates dropped at least 15 percent during that period.

The rush of people around the Valley seeking to buy real estate has led to the drop in foreclosure rates, says Jeff Young, senior vice president of First Financial Equity Corp., a Scottsdale-based financial planning firm.

And in such a market, foreclosure shouldn't be necessary for anyone, he said.

"If you can't find a buyer as you approach foreclosure, you're an idiot," he said. "If someone's going into foreclosure right now, now's the best time for it to happen to you, because you're going to get top dollar for your house. People are going to come in, they're going to spare you the indignity and the hassle of being foreclosed upon."

Steve Blazevic of Phoenix buys and sells houses around the country through his company, Blazevic Funding. Although people come to him to avoid foreclosure, the majority of his customers right now are investors.

He said foreclosures likely are down because of low interest rates and high demand for houses. But that could change.

"Banks are just wanting to loan money to anyone with a job," he said. "It's short-term. I wouldn't be surprised if the figures (foreclosures) are higher in two years."

Buyback companies essentially fill the role of a real estate agent. They usually find private investors to buy houses, clean them up for "curb appeal" and market them to potential buyers.

R.G. "Rock" Argabright, a longtime agent with Realty Executives in Ahwatukee Foothills, said he thinks competition is good for the community.

"Competition is the check and balance of any industry," he said. "I'm not against them whatsoever."

Homes are selling so fast that people can unload them quickly whether they go to a real estate agent or a buyback company, he said.

A franchisee with the company that advertises "We Buy Ugly Houses" says foreclosure is just one reason why people sell their houses through the company.

"My main clientele are ones who either don't want to do any repairs or they can't afford to do any repairs," said Randy Courtney, a real estate broker with Courtney Valleywide Properties in Tempe and a franchisee in the Valley for HomeVestors of America, the a Dallas-based "We Buy Ugly Houses" business.

Courtney said depending on the condition of the house, the company can offer people 5-10 percent less for their house than what they would get selling it conventionally with a real estate agent. Most of the houses Courtney buys are in Phoenix, he said, because that's where older houses in need of repairs tend to be located.

Roger Richards, who now rents a trailer in Maricopa, sold his home on the west side of Phoenix to HomeVestors.

Richards said he is disabled because of injuries he suffered in a motorcycle accident, and because of that, he couldn't afford the payments on the house.

He said he was nearly two months behind on payments and getting close to foreclosure.

"I didn't want that to happen," he said. "I wanted to keep my credit as best I could."

In addition, he said selling the house became difficult for him.

"There were a lot of repairs that had to be done to the house that I physically couldn't do," he said. "I figure that I lost some because of that aspect, but the convenience and the less stress I had to go through was well worth that."

Anyone considering selling a house to a company like Flatland Investments or HomeVestors, should check with the Better Business Bureau to see whether there are any complaints against the company, said Jeremy Brandt, president of Dallas-based fasthomeoffer.com.

In addition, Brandt said, consumers should check the company's references and try to speak with one to three homeowners who have worked with the company.

Businesses like Flatland Investments are unfairly pegged as predators, Nee said. But the way he sees it, they are helping people avoid foreclosure - something that negatively affects credit and can make it difficult to buy another house.

"Many investors are stopping the actual number of foreclosures," he said.

"With anything, there's some people out there in it strictly for themselves, not looking to help anybody. You hear horror stories . . . but there are some really good companies out there."

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Buying a Home Foreclosures- Buying a home foreclosures makes you generate quick profit. Step-by-step process in buying a home foreclosures for quick cash.

How to Handle Credit Report Dispute

How to Handle Credit Report Dispute: "Your credit report--a type of consumer report--contains information about where you work and live and how you pay your bills. It also may show whether you've been sued or arrested or have filed for bankruptcy.
Companies called consumer reporting agencies (CRAs) or credit bureaus compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, employment, and other purposes allowed by the Fair Credit Reporting Act (FCRA), it's important that the information in your report is complete and accurate.

Some financial advisors suggest that you periodically review your credit report for inaccuracies or omissions. This could be especially important if you're considering making a major purchase, such as buying a home. Checking in advance on the accuracy of information in your credit file could speed the credit-granting process.

Getting Your Credit Report"
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Buying a Home Foreclosures- Buying a home foreclosures makes you generate quick profit. Step-by-step process in buying a home foreclosures for quick cash.

Know What's FICO Score is All About

Know What's FICO Score is All About: "Your FICO score or credit score as it�s commonly called is a very important calculation that can control whether or not you are eligible to receive credit and if eligible the terms you can receive credit under. Failure to understand the impact this score can have on you future purchasing power and lifestyle can be disastrous. This article will break down all the information you need to know regarding your FICO score.
As I mentioned above the FICO score is a numerical score that is based on your financial history as collected in your credit report. Creditors can use this number to evaluate whether or not you are able to pay a loan back on time.

The higher the score the more likely you are to pay off a loan on time and the less of a credit risk you pose.
The FICO or credit score ranges are broken down as follows:
720-850 - This represent the best score range
700-719 � Able to obtain favorable financing terms"
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Buying a Home Foreclosures- Buying a home foreclosures makes you generate quick profit. Step-by-step process in buying a home foreclosures for quick cash.