Reviewing “How to Make Money on Foreclosures” by attorney Denise L. Evans is a book reviewer’s nightmare because portions are brilliant, but other sections are downright wrong or at least misleading. In other words, the book is “uneven.”
For example, although I’ve been investing in real estate many years, I learned neighborhood convenience stores such as 7-Eleven or Circle K can be depreciated over just 15 years rather than 27.5 years for residence rentals and 39 years for commercial properties. That’s a big advantage. However, the book also says a residence appraisal might take two months and cost $1,000. I’d like to know where the appraisal situation is that bad.
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The author, an attorney who has practiced in Texas and Alabama, is obviously very savvy about foreclosure procedures. But some of her recommendations could get foreclosure buyers into deep trouble.
To illustrate, she suggests buyers of distressed properties offer the defaulting seller a lease with an option to buy the home back. In several states, that is considered a mortgage loan, not a property sale.
Although a minor point, in the chapter about legal aspects the author says title insurance doesn’t insure against forgeries in the chain of title. According to my information, deed forgeries are the number one cause of title insurance company losses.
But perhaps I am too negative. This is a very good basic book about investing in foreclosure properties. It includes lots of information buyers of distressed properties need to know. However, it doesn’t clarify when the best time is during the foreclosure procedure to buy.
Evans doesn’t reveal when it’s smart to buy before the lender’s foreclosure auction, when bidders should purchase at the foreclosure sale, or when it’s wise to wait until after the foreclosure sale and buy from the foreclosing lender who took the property back because there were no bidders at the auction.
Throughout the book, the author refers to “the bank” to represent the foreclosing mortgage holder. She lives in a relatively small town, Tuscaloosa, Ala., where it might be customary to deal directly with bank foreclosures. But most foreclosure buyers have to contend with distant, impersonal lenders who have no local contacts.
The book would have been much more realistic if Evans shared some of her personal foreclosure experiences to illustrate her topics under discussion. The book lacks these personal examples to add realism to the sometimes-dull explanations.
Some insights are superb. For example, Evans says, “I’ll let you in on a secret about lenders. It’s easier to borrow millions of dollars to buy a shopping center or office building than it is to borrow $200,000 for a four-plex. The larger the loan, the more likely the evaluation will be based strictly on net operating income, and not the borrower’s credit score or income. Don’t think too small when looking for investments. Don’t be afraid of banks.”
There are even a few humorous comments. To illustrate, Evans says, “The process I’m going to describe is called ‘papering the file.’ Lenders are comforted by fat files, auditors are delirious with joy, and file-room clerks rest easy with the confidence of perpetual job security.”
Chapter topics include “Learn to Talk the Talk”;”Buy a Property for Your Personal Residence”; “Decide What You Want in Investment Property”; “The Inside Scoop on Real Estate Loans”; “When Good Loans Go Bad”; “Find Troubled Properties Early”; “Find Borrowers from Public Notices”; “Eliminate Potential Problems Quickly”; “Interview the Borrower”; “Estimate Fair Market Value”; “Additional Costs to Factor into Your Planning”; “Structure a Deal with the Borrower”; “Structure a Deal with the Lender”; “Go to Foreclosure Sales”; and “Buy After Foreclosure.”
This book is worth reading if you want to buy foreclosure property. But read everything with a questioning mind. The author has lots of good advice, and some that isn’t so good. This book could have been much better with some personal examples. On my scale of one to 10, this “uneven” new book rates a disappointing seven.
“How to Make Money on Foreclosures,” by Denise L. Evans, Attorney-at-Law; (Sphinx Publishing-Sourcebooks, Naperville, IL), 2005, $16.95, 231 pages; Available in stock or by special order at local bookstores, public libraries, and www.amazon.com.
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