But don't get too close. "The No. 1 request of the person in foreclosure is, 'I want to save my house, and I want a place to live,' " says Conti, who typically makes between $20,000 and $50,000 per property. So some investors will buy the house and lease it back to the person in foreclosure, which is generally not a good investment. "If the person can't make their payments when they were in the house before, chances are they are not going to be able to make the payments when they are renting it from you." And then the investor (the new owner), and not the bank, is responsible for evicting a tenant who doesn't pay. So, you always need to be aware of your own bottom line, while still being sympathetic to the original homeowner. "The most important thing is to do your homework and find out what the true balances are on the property," says Mazur. And don't be afraid to walk away if the deal is not going to benefit both you and the homeowner. "There's always going to be foreclosures, and they're not always going to be good deals," says McGee. "You have to know what you are doing, or you are going to become a nonprofit very quick."
Be prepared for owners who don't want to leave. If a preforeclosure deal or short sale is not negotiated among the homeowner, bank, and foreclosure buyer, the house is auctioned off on the courthouse steps to the highest bidder. The opening bid is typically the unpaid balance on the mortgage plus any liens or fees. In many cases, the house can be purchased below the market rate, but the buyer is often not given a chance to inspect the property before buying and needs to have a considerable amount of cash on hand to secure the transaction. These public involuntary sales can produce violent reactions in the original homeowners. "I've had situations where they have had one last final party in the house and had holes beaten into the walls and wallboard kicked in," says Gary Thompson, a real-estate agent in Omaha who handles repossessed houses for banks. "I had a house about three years ago where they piled all their garbage for two or three weeks in the dining room and locked the house up in the middle of the summertime. It was lots of flies and stink." Now, when a bank repossesses a foreclosed house, Thompson typically offers a cash incentive of between $500 and $1,500 from the bank to encourage families to leave quietly. "In these cash-for-keys arrangements, they agree to take all their belongings, no damage occurs to the property while they are leaving—like parties and beating holes in the walls—and we define a move-out date so we know when the property is going to become vacant," he says. "They don't damage the property because they want the money." But foreclosure buyers become responsible for removing old tenants and repairing the property. If the tenants don't leave within a time frame that varies by state, the locks can be changed by the sheriff. "Typically, just the changing of the locks and a little police or private security and they will usually leave quite quickly," says Mazur.
It's just business—except when it's not. "On any transaction, whether it's the preforeclosure stage where you actually do get to speak with the current owners of the home or whether it's already a bank-owned property, it is a business transaction, but it does have a very emotional feel to it," says Mazur, whose first home purchase was a foreclosure property. "If you treat each other with respect and use an independent third party [for paperwork], it puts people a lot more at ease than trying to bring in your own people to try to shimmy through paperwork."
