132958 Resource 120085 120144 120144 1152029031129 1152029109025 Controlled Foreclosure Investing: Risky Business?

Legal actions by prior owners, hidden liens and easements can spell disaster for small investors.

As the Santa Clarita real estate market cools from the last 3 years of frantic activity and many intro-rate mortgages are beginning to revert to the current market rates, many potential investors are eying the foreclosure market.However, buying foreclosures at auction can be a very risky business that can result in major financial losses if you're not careful. Before buying a property at a foreclosure auction, be sure to investigate the property as well as the current owner. Find out which loan is being foreclosed on - is the first, the second, or another loan? If it seems as though there's a ton of equity to be had at the auction, then it's possible that the second mortgage is foreclosing, which means that you'd take the property with the first mortgage still in place. OUCH!!! That can be a huge liability!Even if it's the first mortgage that's being foreclosed on, you'll likely end up paying other liens, such as mechanics or judgment liens, in addition to the auction price. You'll always take ownership of the property subject to any IRS liens and past-due property taxes. Check out the owner's financial records, especially if there's a bankruptcy filing, to assist in discovering any other potential liabilities that you may be taking over.Also beware of the possibility that the owner can challenge the auction sale stating that there was not proper notification prior to the sale. Although this may not necessarily void the sale, it can certainly delay your possession of the property while the owner stays there rent, mortgage, and property tax free! This can drag on for a very long time, and if the owner or tenant refuses to move out even after these legal issues are satisfied in your favor, it can cost you another year's worth of time and mortgage payments as well as legal fees.Then there's the condition of the property to consider - you can't just knock on the door and ask for a tour of a property that is scheduled for auction! And even if you did and were allowed access, there's no guaranty that the property won't be vandalized before the owner vacates. So be prepared to repair damage and clear out garbage in your newly-acquired foreclosure property.That said, there are certainly gains to be made in the foreclosure market, but it's not for the squeamish. Foreclosure "sharks" spread the liability of a bad investment over several properties, so it's not so painful to them as it would be to a single property investor who ends up with a nightmare. Bottom line is to make sure that you do your due dilligence to minimize the risks, and then keep your fingers crossed that the current owner won't start legal action in an attempt to reverse the sale. 10 application/xml false bankruptcy foreclosure foreclosure auction investment liens market rates mortgage property taxes santa clarita real estate Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; .NET CLR 1.0.3705; .NET CLR 1.1.4322; Media Center PC 3.1) 127.0.0.1 127.0.0.1 lslocum false true false false true 181698 false false true false false false true 120085 blog blogsite/SantaClaritaRealEstate/web