Foreclosure investing 2012

From the mid-1980′s forward there were about 20 years where foreclosure investing was a hot area for entrepreneurs. Individuals looked toward foreclosure auctions and bank REO property to get properties at a discount to then resell in the traditional market. The industry was so popular that dubious training courses in the 80′s and flamboyant house flipping television programs in the 2000′s grew out of the trend.
For the most part the year 2007 halted most aggressive foreclosure buying. However, In the past year there has been some resurgence of foreclosure property and non-traditional real estate interest by investors. Some are targeting Fannie Mae and Freddie Mac auction events looking to purchase packages of properties. The investing appetite this time around  is a more organized and capitalized market. Instead of an individual who may buy a house or two at a time to fix up and resell, the 2012 foreclosure investors are corporations who have raised tens of millions in capital and are looking to purchase dozens of properties or even hundreds on speculation. More frequently than in the past, the intent is often to prepare the properties for a large scale rental program.
Title records offices in several key markets are seeing recorded deeds where corporations have been formed within the past 18 months and have already accumulated over 100 foreclosure properties at auction. Tax auctions and mortgage foreclosures are both being targeted.
From a title search point of view, we are seeing some other differences in the current foreclosure investing marketplace. The newer investor groups are doing more proper due diligence when putting together their property packages. Full title searches are being done, and the principals are inquiring into the laws and regulations where the house is located to understand legal aspects such as rental requirements, rights of redemption, zoning, lien priority, and judgment history. This is a significant change from the past where we often received calls from an investor looking to get a title search on a parcel after they had already purchased it. In some cases the results were disastrous, such as the scenario where a buyer purchased a property at what seemed like a bargain only to find that they had purchased a second mortgage, with a large first mortgage still outstanding.
It will be interesting to see how these new investors do with returns on these properties. On the one hand the prices are extremely low and cash flows from rentals might work. On the other hand the past 5 years has put a great deal of liens and judgments in the land records, and all it would take is one stubborn lien on a property to erase profits. The economic and employment picture has resulted in a large number of IRS tax liens outstanding, and these are often the ones which slip by inexperienced title searchers due to the way they are recorded in the land records.
Foreclosure investing has never been for overly cautious investors, but the profits may be worth the effort.