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Part 3: A Better Way to Locate Distressed Properties

The paradigm of old, beating the paths of subdivisions looking for apparently unoccupied homes overgrown with sage and shrubs, asking a next door neighbor who owns it, then tracking him or her down and relying on her for information regarding existing mortgages and other indicators of possible equity, is just that, an old paradigm. The internet makes it a far less daunting proposition.

Start at the local county recorder’s website. When a borrower becomes delinquent on the mortgage for a period of a month or two or three, the first thing the lender does is record a Notice of Default and Election to Sell indicating its intent to foreclose if the loan is not immediately brought current. Which is how you find out who the owner is. Most websites allow you to refine your search specifically to certain documents, such as a default Notice, and a survey of a typical county in Northern Nevada with a population of 400,000 evidenced 307 recorded Notices of Default three months ago, in December, some 423 in February, 2008, and 474 in March. (The foreclosure rate in this county is up a phenomenal 600% over last year.)

The Notice of Default usually doesn’t contain the address of the property, only the tax Assessor’s Parcel Number. The information gap is easily overcome by cross-referencing the APN in the county tax assessors’ website which lists the actual address. You can as well confirm the homeowner’s name, and review all the typical information that the assessor compiles, including square footage, the year the home was built, the number of bedrooms and bathrooms, assessed value, of course, and many times even a picture of the property. It also contains a history of transfer tax payments for the home, which lists the sale price every time a taxable transfer occurred.

With that information, you can get an idea, a remarkably good idea, of whether there exists any equity in the home. With the homeowner’s name and the Assessor’s Parcel Number in hand, return to the recorder’s site and plug it in to the grantor/grantee index and every deed of trust, as well as tax liens, mechanics’ liens and any other potential encumbrance, is listed.

There is certainly no shortage of operators out there who will for a price provide you a list of potentially distressed properties but they at best offer cursory information. So why would use such an intermediary when you can get the same information they would provide on your own and, with the method outlined above, far more? No need to get on the bus either; you can do the research from home, then take a leisurely drive at your convenience.

It takes roughly 120 days from the time the Notice of Default is filed until the property is actually auctioned off on the steps of the courthouse. The most advantageous approach it to work with the lender and the owner to acquire the property prior to the sale.