Real Estate Matters

Finding the Silver Lining in Foreclosures

By Ilyce R. Glink and Samuel J. Tamkin
Saturday, March 8, 2008

As if Detroit and the rest of Michigan haven't suffered enough.

Last year, Detroit led the United States in foreclosure rates, with close to 5 percent of its households entering some stage of foreclosure, according to RealtyTrac, an online marketplace for foreclosure listings.

That was nearly five times the national average and almost double the rate of foreclosures in Detroit in 2006.

But every cloud has a silver lining. Just ask Ralph Roberts, a real estate agent in Detroit who says he has bought and sold more than 2,000 foreclosures.

"This could be a great time to buy a home -- if you have the resources," he said.

Roberts, the author of "Foreclosure Investing for Dummies" and "Flipping Houses for Dummies," said in a recent interview that he thinks more than 6 million families are in distress nationwide.

"Maybe 1 or 2 million are behind in their mortgages, and more have received their foreclosure notice," he said. "But 2 million families will lose their homes this year."

Roberts said now is the time for fire-sale prices on such properties.

"Properties could double in value over the next 10 years," he said. "But you have to be willing to go in, buy them and hang on for the longer term."

With foreclosure investing, he said, you get what you pay for. His book on foreclosure investing isn't of the "get rich quick with no work and zero down in cash" variety. Instead, he values doing as much homework as possible ahead of time.

To learn how to read complicated real estate and tax records, he suggests you should do an exhaustive search on your own residence. Once you become familiar with how the information you know to be true is laid out in tax records, deeds and other documents, you can begin to research homes in distress.

In addition to doing due diligence on a particular home Roberts recommends creating a file that contains a copy of the foreclosure notice or notice of default; title commitment and a 24-month history in the chain of title or the last two recorded documents; a copy of the deed with the current homeowners' names; the last recorded first mortgage, so you know how much the current homeowners owe (some of this may be available online); copies or documentation of all liens against the property, including property tax liens; a map showing the location of the property; your exterior home inspection (with photos and videos), plus neighborhood photos; the city worksheet on the property showing all repairs, inspection reports and other information; local multiple listing service data showing how much comparable homes are selling for in the area; a copy of the tax bills and notes on whether they are paid; notes from meetings with or calls to neighbors, if you met with them while doing your research; and a copy of the property evaluations on which property taxes are based.

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