Profiting from problems of others

The Baltimore Sun

As if Detroit hasn't suffered enough.

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

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

But every cloud has a silver lining. Just ask Ralph R. Roberts, a top real estate agent in Detroit who says he has personally bought and sold more than 2,000 foreclosed properties during his career.

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

Roberts, who is the author of Foreclosure Investing for Dummies and Flipping Houses for Dummies, said in a recent interview that he believes that 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 says that now is the time to pick up properties at fire-sale prices. "Properties could double in value over the next 10 years. But you have to be willing to go in, buy them and hang on for the longer term," he advises.

With foreclosure investing, he says, 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 doing 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, documents and deeds, you can begin to research homes in distress.

In addition to doing due diligence on a particular home, Roberts recommends that you create 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).

Also important are 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; city worksheet on the property showing all repairs, inspection reports and other information; local multiple listing service (MLS) data showing how much comparable homes are selling for in the area; copy of the tax bills and notes on whether they are paid up; notes from meetings with or calls to neighbors, if you met with them while doing your research; and a copy of the SEV (standard equalized value) of the property, on which property taxes are based.

"Most people, when looking for a foreclosure, think 'no' - they don't think 'know,'" Roberts says. "To buy a foreclosure successfully, you have to build a Rolodex, get on the Web, talk to brokers and go do your research."

Roberts said the Internet has been a boon for foreclosure investors.

"Go to the county's Web site and see what kind of information they have listed. Sign up for the local legal newspaper. It costs about $1 per week," he explains, adding that he subscribes to a number of foreclosure Web sites, some of them paid sites.

What I like best about Roberts and his books is that he appears to care a lot about consumers. He cautions foreclosure investors to think about homeowners and their redemption rights.

And he has put a lot of time and money into fighting mortgage fraud (see www.flippingfrenzy.com). Last year he published Protect Yourself from Real Estate and Mortgage Fraud, written with attorney Rachel Dollar.

Contact Ilyce Glink through her Web site, www.thinkglink.com, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.

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