DEAR BOB: I am interested in your suggestion not to bid at foreclosure sale auctions but to instead contact the foreclosing lender immediately after an unsuccessful auction. What are the advantages of this strategy, rather than bidding at the public foreclosure sale? –Adrienne P.

DEAR ADRIENNE: You are obviously very intelligent. If you bid at the lender’s foreclosure sale auction, you must produce cash, either at the auction or soon thereafter.

Purchase Bob Bruss reports online.

Also, there is often competition from professional bidders, known as “the 40 thieves.”

If there were no bidders at the auction, the lender then obtained title to the foreclosed property. It is then known as REO (real estate owned).

Most lenders are anxious to get rid of REO property as fast as possible because holding it costs the lender money every day. If you contact the foreclosing lender fast (the day after the auction is best) before the property is listed for sale with a local real estate agent, be sure to emphasize in your offer the lender will save the agent’s typical 6 percent sales commission.

Also, some lenders offer incentive mortgage financing on their REO property, making it easy for you to buy with minimal cash. More details are in my special report, “Foreclosure and Distress Property Secrets,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com.

WHY BANK WON’T APPROVE A MORTGAGE ON UNCOMPLETED HOUSE

DEAR BOB: My house was damaged in a storm. I recently put on a new roof and painted the exterior. However I can’t find any bank that will make me a mortgage because the drywall is not completed on the interior. Now I need a mortgage to pay the final construction costs so I can sell the house. Any ideas? –Mario M.

DEAR MARIO: Most institutional lenders won’t approve a home mortgage on a house that is undergoing renovation, primarily due to mechanics’ liens. However, the bank where you do business might make a construction loan. If not, perhaps a home equity loan.

Or an individual lender will probably make a “hard money” loan for a year or two. But the interest rate won’t be cheap.

An experienced mortgage broker can usually find a local lender for just about any unique situation such as yours.

CAN HOMEOWNER KNOCK DOWN HOUSE AND BUILD NEW?

DEAR BOB: How do homeowners obtain financing to knock down their house and rebuild it again? It seems like all my neighbors are doing this. My one-family house is pretty old (1925) and needs lots of work. I am thinking of knocking it down and building a two-family house. Where would I start if I go this route? –Lida R.

DEAR LIDA: Presuming the zoning for your lot allows construction of a two-family house, a good place to obtain a construction loan is a nearby bank branch or community bank that specializes in construction loans.

Ask if the bank offers construction loans that convert into a permanent mortgage after construction is completed. A competent community banker can probably refer you to an architect and general contractor to build your two-family house.

The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Ask to Avoid Overpaying in a Buyer’s Market,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

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