The Silvano Group

Is this a good time to buy a commercial real estate property?

Many people ask me this question and the answer is always the same: “You are not buying the whole market. You are buying a specific property in a specific market”. And no matter the market, the most important factors for success remain the same. The correct reasons for buying a commercial income producing property have nothing to do with the local comparable sales like residential real estate investing; they have everything to do with the size of the income and quality of the Tenant along with the lease and terms that go along with the deal.

In commercial investing you are the buying future streams of income that will be produced by the asset. So your success is almost guaranteed if you focus on answering the following questions during your due diligence:

1) How much is the property producing in net income?

2) How safe is the income? (Based on the Tenant)

3) For how long should I expect to receive that income? (Based on the Lease)

4) How much will the financing cost me? (Based on the Bank)

5) How easy will it be for me to keep the property? (Is the lease NNN- do I have deferred maintenance to deal with?)

6) How much positive cash flow will I make?

7) What is the potential for a higher and better use for the property? (Now and in the future?)

What other deals are out there? (To have an alternative option for the use of my resources)

9) Will I still have some money left over for cash reserves?

If you know how to go through these questions and based on your training can answer them with a high degree of certainty, then the market in general is absolutely irrelevant.

An untrained person looks at general data like “office space” occupancy levels in a city, and he/she sees that the number of vacancies have increased statistically so he/she panics before even looking at a specific property and who is renting, what is the asking price, what is the potential is etc.

I always say news is how you perceive it based on your mental models.

I find it a lot more predictable and accurate to forecast long streams of income on a commercial property with a quality Tenant who signed a long term lease with specific escalations than trying to speculate on a stock market fundamentals or futures, commodities, currencies, or residential cyclical investing.

What never ceases to amaze me is how little competition there is in commercial real estate. Most people are untrained and have no business model for this type of safe investing so they lose money in so many other ventures that are unpredictable or cyclical based on general market and political events.

THE IMPORTANCE OF GOOD RECORD KEEPING

    As the owner or manager of a small business, you invest tremendous time and energy to ensure your company’s success. You want the greatest possible return on your investment, and good financial records can help.

  Your Key to Success Is Information

    Think back to the steps you went through to open your business. From the start, you’ve done everything right. You invested a tremendous amount of time in gathering information - about your abilities, finances, market, customers and competitors.

    You understood why you wanted to go into business - the opportunity to be your own boss, a desire for financial independence, the freedom to set your own course.

    Then you chose the business “right” for you. And, more importantly, your market research showed that your particular “business dream” was in demand.

    You then took all this information and developed a business plan- the same business plan that helped you get the loan you needed to open the doors. You demonstrated your business skills to the bank stating precisely how much money you needed, why you needed it, and how you were going to repay it.

  What Went Wrong?

    While it’s true that success often brings success, it’s equally true that success often breeds failure - particularly for a small business.

    That’s because as a business begins to grow rapidly, the owners often work frantically to simply meet demand, minimizing the time they devote to keeping good records.

    If escaping paperwork was one of your reasons for starting abusiness, it is critical that you hire someone to perform the necessary task of keeping your financial records. Although you must pay for these services, bear in mind that solid financial advice frequently can increase your profits, more than covering the professional fees.

    Good records will help you answer important questions about your company’s financial health. What’s really happening in my business? Why is cash flow always a problem? How much is real profit anyway? If you’re not exactly sure, then it’s time to return to the basics - the basics of good record keeping.

  WHY?

    Simply put, a small business that fails to keep complete and accurate financial records places its long-term success and survival in grave doubt.

Complete and accurate financial record keeping is crucial to your business success. Here’s why:

 1.   Good records provide the financial data that help you operate more efficiently, thus increasing your profitability. Accurate and complete records enable you, or your accountant, to identify all your business assets, liabilities, income and expenses. That information, when compared to appropriate industry averages, helps you pinpoint both the strong and weak phases of your business operations.

 2.   Good records are essential for the preparation of current financial statements, such as the income statement (profit and loss) and cash-flow projection. These statements, in turn, are critical for maintaining good relations with your banker. They also present a complete picture of your total business opera tion, which will benefit you as well.

 3.   Good records are critical at tax time. Poor records could cause you to underpay or overpay your taxes. In addition, good records are essential during an Internal Revenue Service audit, if you hope to answer questions accurately and to the satisfaction of the IRS.

  What Exactly Will the Records Tell You?

 The following checklist highlights the type of information your financial records should provide to assure your success:

*  How much income are you generating now, and how much income can you expect to generate in the future?

*  How much cash is tied up in accounts receivable (and thus not available to you), and for how long?

*  How much do you owe for merchandise? Rent? Utilities?     Equipment?

*  What are your expenses, including payroll, payroll taxes, merchandise, advertising, equipment and facilities maintenance, and benefit plans for yourself and employees (such as health insurance, retirement, etc.)?

*  How much cash do you have on hand? How much cash is tied up in inventory? What is your actual working-capital budget?

*  How frequently do you turn over your inventory?

*  Which of your product lines, departments or services are making a profit, which are breaking even, and which are financial drains?

*  What is your gross profit? What is your net profit?

*  How do all of the financial data listed above compare with last year - or last quarter? How do they compare with the projections in your business plan?

*  How do all the financial data compare with those of your competitors? With those of the industry?

  While your review of this checklist may have uncovered some glaring deficiencies, it’s never too late to correct problems related to poor record keeping. It may take a bit of time and effort to ana lyze the company checkbook, take inventory, review bank statements and, in general, catch up on your paperwork.

  It is essential, however, that you make the effort to determine the precise financial condition of your business. It is as critical as maintaining good customer relations.

  What to Look for in an Accountant

  Let’s assume you follow the path of many successful entrepreneurs and seek professional assistance from an accountant. How do you find an accountant who is knowledgeable, capable and discreet? You should seek an individual with high ethical standards who is a respected member of the community.

  Due to the ever-changing complexities of tax laws and developments in accounting methods, the accountant must keep up. Look for an accountant who takes advantage of educational seminars, professional publications and other continuing education opportunities.

  You will probably want your accountant to assist you not only as a record keeper, but also as a consultant and financial advisor who understands your business affairs almost as well as you. Seek out an accountant with broad experience and a well-rounded education.

  Professional accountants are listed in telephone directories under accountants, public accountants, bookkeepers and tax preparers. Look for references or recommendations from local business associates, your banker or attorney.

  The Basic System

  A basic record-keeping system, whether on paper or an off-the-shelf computer software program, should be simple to
use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis.
It needs:

*  A basic journal to record transactions (receipts, disbursements, sales, purchases, etc.)

 *  Accounts receivable records

 *  Accounts payable records

 *  Payroll records

 *  Petty cash records

 *  Inventory records

  An accountant can develop the entire system most suitable for your business needs and train you in maintaining these records on a regular basis. These records will form the basis of your financial statements and tax returns.

  Without knowing where your business is financially, you may be forced to close or sell, despite an excellent customer base. You could find yourself in this trap if -

*  your cash flow is desperate.

 *  you are unable to pay creditors.

 *  too much of your cash is tied up in old inventory and accounts receivable. Sure, owning a business places tremendous demands on your time. It’s easy to let things slip. Resolve now to avoid the trap of letting the books wait until you are less busy … or more rested… or have time to start and finish the job all in one sitting… or ….

   Make a pledge now to maintain your records and assure your success!

  For More Information

  Information is power. Make it your business to know what is available, where to get it and, most importantly, how to use it.

 Sources of information include:

 U.S. Small Business Administration

 *    SBA District Offices
 *    Small Business Development Centers (SBDCs)
 *    Service Corps of Retired Executives (SCORE)
 *     SBA OnLine (electronic bulletin board)
 *    Business Information Centers (BICs)

  The SBA has offices located throughout the United States. For the one nearest you, look under “U.S. Government” in
 your telephone directory.
 You also may request a free copy of The Resource Directory for Small Business Management, a listing of for-sale publications and videotapes, from your local SBA office or the SBA Answer Desk.

  Other Sources

 *  State economic development agencies
 *  Chambers of commerce
 *  Local colleges and universities
 *  Libraries
 *  Manufacturers and suppliers of small business products and services
 *  Small business or industry trade associations

  Did you know the SBA …

*  Has a portfolio guaranteeing over $27 billion in loans to 185,000 small businesses that otherwise would not have had such access to capital?

*  Guaranteed over 60,000 loans totaling $9.9 billion to America’s small businesses in fiscal year 1995?

*  Last year extended management and technical assistance to nearly 1 million small businesses through its 950 Small Business Development Centers and 13,000 Service Corps of Retired Executives volunteers?

*  Provided more than 45,000 loans totaling $1.2 billion to disaster victims for residential, personal property, as well as business losses in fiscal year 1995? Has 7,000 private sector lenders as partners providing their capital to small business?

*  Has increased its venture capital program with more private capital in the past two years than in the previous 15 years combined?

*  Provides loan guarantees and technical assistance to small business exporters through U.S. Export Assistance Centers in 15 cities?

  Did you know that America’s 22 million small businesses …

 *  Employ more than 50 percent of the private workforce,
 *  Generate more than half of the nation’s Gross Domestic Product, and
 *  Are the principal source of new jobs?

  All of the SBA’s programs and services are provided to the public on a nondiscriminatory basis.

 If you’re planning on putting your home on the market, consider fixing it first. Simple cosmetic changes don’t cost very much and they can make a real difference to a buyer.

From Consumer Reports, here are four ways to spruce up your home for a sale:

Take out the stuff.
You should throw out, or at least hide, the clutter. Pick up old newspapers and magazines from the coffee table and put the shoes away in the closet. Don’t let potential buyers become distracted by all your stuff. Homes look better without clutter. They also look more appealing with furniture, so fill any empty rooms you may have.

Polish and clean.
You don’t want to show a dirty house. Mop the floors and scrub the counter tops. Clean kitchen appliances as well. If it’s an older model appliance, a little shine will make it seem newer. If a room needs a fresh coat of paint, then paint it. Try to stay away from bright colors. These might not appeal to every buyer.

Arrange your furniture.
A good furniture layout can change the way a room looks. Try setting up chairs and couches around a focal point such as a fireplace.

Bring in a professional.
Professionals in this arena are called stagers. Their fees can range from $200 for a two-hour consultation up to $5,000 for a full staging. Stagers can also provide any furniture and accessories that may be needed. A good resource to find a stager is the International Association of Home Staging Professionals, at www.iahsp.com.

Borrowers seeking bad credit commercial loans have basically three options.     However none of these options are ideal. They are money loans, commercial hard money loans and SBA 7a Loans And due to the credit crisis these options are becoming more and more limited.  Never before has personal credit been so important for commercial loans. 

This may seem painfully obvious, but worth noting that everything should be done by the borrower to restore/improve their personal credit score.  Commercial loans with bad credit are very expensive and also very hard to get funded in this market.  We are currently in one of the worst credit crisis’s since the Great Depression and banks are getting very conservative.  Credit scores are very easy for banks to identify and “pick on” 

As far as the expense, the difference in payment on a $1,000,000 loan amount  with a rate at 7% (is $7,067) vs 9% (at $8,391) is significant.  That a  $1,324 per month increase, or:

• $15,891 per year increase in payments, or
• $79,497 increase in payments over a 5 year period

Thats real money, cash out of your pocket…  Thats not potential equity build up, or principle paydown, etc but real cash out of your hands.  And this does not include the other costs to do loans.  For example, SBA 7a loans normally have a 2.75% “guarantee fee” which are points the Small Business Administration charges.  On a $1,000,000 loan amount that would be $27,000 in fees you would have to pay.  Hard money is more expensive.  Expect to pay 4-6%, again thats $40,000 - $60,000 in fees just to close the loan.  

Business Loans & Grants

The U.S. Small Business Administration (SBA), the federal agency created specifically to assist and counsel small businesses, suggests the following sources of business capital in addition to :

1. Finance Companies
2. Mortgage Companies
3. Frieds, Relatives, Individuals
4. Government Agencies (such as SBA)
5. Banks
6. State Government Financing Sources
7. Savings and Loan Associations
8. Insurance Companies
9. Small Business Investment Companies
10. Venture Capital Firms
11. Pension Funds
12. Private Foundations

Types of Business Loans

Banks and other financial institutions can assist you by providing business loans through personal or commercial credit. Examples of personal credit include credit cards, and home equity loans. Commercial credit includes business loans; here are some of the options:

Short-term business loans are one of the most common types of business loans and are usually for less than one year. They can provide interim working capital for a business temporarily in need of cash, and are typically repaid in a lump sum when inventory or accounts receivable are converted into cash.

Intermediate-term business loans are often used for a business start-up, the purchase of new equipment, expansion, or an increase in working capital. The maturity dates range from one to three years.

Long-term business loans generally are made for major capital improvements, acquiring fixed assets, or business start-ups. The term of the loan runs for periods of three to five years and is usually based in part on the life of the asset financed. Repayment is usually made in monthly or quarterly installments.

A line of credit offers you the ability to borrow money repeatedly, up to your credit limit, without having to re-apply. A line of credit is particularly important to businesses that experience seasonal fluctuations.

The Business Loan Application Process

Among the best assets you can bring to the lender is a well thought-out and documented business proposal. You need to clearly state the purpose of the loan (will the money be used for temporary working capital, buying equipment, or expanding facilities); the amount of funds needed and for how long; and a repayment schedule. Your business proposal should include the following information:

business description that tells the nature of the business, describes the product and its market, identifies its customers and competition.

personal profile that outlines the background and experience of each of the principals in a resume.

proposal that states the type of loan requested and its purpose.

business plan that outlines your corporate strategy for the next three to five years; it will aid you and the lender in determining whether the business will generate the cash flow needed to repay the loan.

repayment plan that tells how you propose to repay the loan or outlines a repayment schedule. The lender will be expecting you to repay the borrowed funds from the profits produced by the business. As a contingency, you might need to develop a plan on how you would repay the loan if the profits alone turned out to be inadequate.

supporting documentation will include copies of pertinent papers that support the information contained in your loan proposal-for example, a lease, certificate of incorporation, partnership agreement, letters of reference, contracts, invoices or vendor quotes.

collateral that you will use to secure the payment of the loan. Collateral can include business and personal assets such as inventory, equipment, and accounts receivable or real estate, stocks, bonds, and automobiles. Financial statements, both personal and for the business. It should contain a balance sheet showing business assets and liabilities, and a profit-and-loss statement showing revenues and expenses. You should be prepared to provide copies of your personal tax returns. You may be asked for a list of credit references. Lenders will check your personal as well as your business credit rating.

Lenders will carefully examine your financial statements and business projections. As a borrower, you must be fully prepared to answer questions about them.

personal guarantees of the owners or other principals usually are required, even from an established business. The lender also may request another party’s guarantee such as a cosigner or a surety, or may request a government guarantee from the U.S. Small Business Administration or other government agency.

In the case of secured credit, the lender is allowed to obtain a spouse’s or other co-owner’s signature on certain documents when the applicant offers, as security for the loan, property that the two own jointly. In this case, the spouse or other co-owner may be asked to sign documents—such as a mortgage or other security agreement that would be necessary under applicable state law to make the property available to satisfy the debt.

10 THINGS YOU MUST KNOW WHEN SELLING

1.      PRICE YOUR HOME RIGHT

In a buyer’s market, to successfully sell your home, you must price your home competitively based upon its competition.  In other words, you can get an idea of what your home is worth from an appraisal or a CMA(pending and sold comparables in your neighborhood). However, to actually sell your home, you must be at the top of the competition in your price range.  If you or your realtor do not abide by this rule, then you will have a difficult time selling your home.

2.     MAKE YOUR HOME SHOW LIKE IT NEVER HAS BEFORE

If you are planning to show your home in its present condition,  then you are more likely presenting it wrong.  It is hard to make the interior of your home look like a new construction model home, but you should make every attempt to have it resemble one.  Clean your home like you never have before.  Once you have done that, immediately clean it again.  It is so important to have an extremely clean home.  Try and exclude all clutter in your house.  Depersonalize and neutralize your home to tend to all buyers, including putting away a lot of the personal items lying around.

3.     PAY THE CORRECT COMMISSION

In a buyer’s market, the last thing you want to do is start cutting the realtor commissions or using a discount realtor.  This is one of the main reasons a home gets less showings or no showings.  Once that happens, you will probably be dropping your price drastically to get a showing.  You will lose more money than if you just paid the correct commission.  There are enough homes on the market in your price range that realtors tend to only show homes that offer at least 4%.  Please understand that this is one of the biggest mistakes homeowners make to try and save money.

4.     PICK THE SILVANO GROUP  MARKETING PLAN

Some of the most important qualities to look for is the reputation of a brokerage firm.  Also, finding a successful agent with the best marketing plan within that brokerage firm should also be your main concern.  This will ensure you the best chance of selling your home at the price you expect.

5.     SHOWING YOUR HOME

Make sure your home is always clean and ready to show!  Accept every opportunity to show your home no matter what the circumstances are.  Make sure you leave your home at every showing to make the potential buyers more comfortable.

6.     IF YOU HAVE PETS, SMOKE, OR ANY OTHER ODORS FOLLOW THESE STEPS

If your home has an odor because someone has smoked indoors, you must do everything to eliminate the smell.  You may have to clean all the air ducts, spray and/or repaint the entire interior of your home, and possibly replace the carpet.  Obviously it would be a good idea to not smoke in the house during the time your home is on the market.  Most people who smoke themselves do not like to walk into a home and have that smell lingering around.  

Most families have at least one pet.  If you are one of these pet owners, you may be immune to the odors that are actually there.  If you think “not your house” or “not your pet,” you are probably unaware.  When selling your home, you must go out of your way to make sure the home is odor-free and smells clean and refreshing at all times.  You must do everything you can to keep all of their necessities put away and, if at all possible, do not have any pets at the showings.  All pet owners love their animals, but please remember that there are many buyers that are not pet owners and they may be allergic to cats or dogs.  It is to your advantage to attract all potential buyers.  Other odors may include dirty laundry, garbage, and cooking spices.

7.      IMPROVE YOUR CURB APPEAL

Improve your landscaping as much as possible, including the front and back.  Make sure the exterior of the home is clean and there is no debris on the property.  Remember that the front of the home is usually the first picture a buyer may see when choosing what homes to view, so understand the importance of the first impression of your home.

8.      UPDATE YOUR HOME 

Some of the smallest changes make the biggest difference.  These may include replacing the carpet, appliances, floors, countertops, sinks, hardware or repainting the interior or exterior.  Find out what is the most popular at the time and always try to use neutral colors.

9.       KNOW YOUR MARKET AND ADAPT / STAY INFORMED

At least once a month, you need to get an update on the real estate market.  You need to know your competition, so get a report showing homes that are active in your area and in the same price range.  Also, take a look at the homes that have gone pending over the past month.  This way you will know which homes are selling instead of yours.  If prices are falling, you need to know so you can adapt to your competition.  This is one of the most important aspects and often overlooked by realtors and homeowners.

10.     KNOW YOUR PAYOFF AND ESTIMATED NET SHEET

You should  know approximately what you are going to make once you sell your home.  Unwanted surprises and hidden costs that show up at the end of escrow can be devastating and may affect a potential purchase.  Call the company who owns the loan on your home and make sure you do not have a prepayment penalty (ask your realtor if you are unfamiliar with this).  Find out if there are any liens or unpaid child support on the home that must be paid through escrow.  Always make sure your realtor provides you with an estimated net sheet that shows all the costs you incur when selling your home.  Some of these costs consist of escrow fees, realtor fees, closing costs, roof cert estimate, termite inspection estimate, septic certification, home inspection repairs, home warranty, and so forth.  If you get an offer on your home that is not your asking price, always get a new estimated net sheet that will reflect the new price.

When valuing a business for sale, start by reviewing basic financial statements.

Example: A husband and wife have been working in his father’s small business for almost four years now. They would like to buy his small business from him. It is a independent copier/fax dealership located in a small town.

They know the market potential and that his accountant has taken advantage of all of the possible loop-holes to shelter him from taxes. This will be the first year that the financials will depict a (pretty close) picture of the company. How do they evaluate the company and gain a fair evaluation of what they should offer him for his company?

Two major financial statements should be reviewed with their accountant, the balance sheet and the statement of income and expense.

The Balance Sheet should show how the assets, liabilities and net worth of the business are valued. Items shown on the Balance Sheet may not tell the entire story. For example, is the equipment valued realistically? The equipment may be obsolete despite what is shown on the statement. Are the accounts receivable fully collectable? Also, the liabilities may not reflect contingent liabilities, such as a pending lawsuit or potential tax liabilities. These are just a few of the many questions you must ask to determine true value of a business.

Looking at the next important financial statement is the Statement of Income and Expense (also called the Profit and Loss Statement). Are the sales correctly reflected? Unfortunately, many businesses dealing with cash do not deposit all the sales receipts. If so, how can the seller prove the correct sales? Or, when anticipating selling the business, the sales may be overstated. The expenses may contain personal items that are not business related. The point I am trying to make is that you need an experienced CPA or business appraiser who represents your interests to represent you when buying a business.

In this example we may be dealing with a father who is trying to help his kids as fairly as he can. He may be willing to agree to terms that will not be a strain on their finances. We may also assume that in retirement, he would like to have an ongoing income stream from the business. Since the business shows good prospects for the future I can envision structuring a deal that is beneficial to both of them. The idea is for the buyers to give as small a down payment as possible to afford them maximum working capital.

A percentage of the gross sales or net profits can be paid out to the father for a certain numbers of years. Using such a formula will enable him to benefit by any future growth in the business. To arrive at a total payout amount would, of course, require knowing a lot more information that the SILVANO GROUP will acquire. We ask all the right questions.

These days, it seems a lot of real estate investors are researching the topic of buying a home in foreclosure — and with good reason, too. That’s because there are a lot of foreclosure homes on the market right now, so there are plenty of good deals to be found. That is, if you know a thing or two about buying foreclosure homes the smart way.

If you’re coming into this article with very little knowledge about this subject, don’t worry. We will start with the basics and progress from there. With that said, let’s start with the reasons that buying a home in foreclosure is popular in the first place.

Buying Foreclosures Can be a Good Investment

The first thing you’ll notice above is that I said buying a home in foreclosure “can” be a good investment, suggesting the possibility (but not the certainty) of getting a good deal on a home. This is what attracts people to the practice of buying foreclosures in the first place, the possibility of getting a home for less than market value.

Some people use this practice as a way to purchase the home they intend to live in. Other buy foreclosure homes for a living, turning them around for a profit and moving on to the next deal. Regardless of which camp you fall into, there are certain things you need to know about buying a home in foreclosure before you venture out to do so.

The first thing you should understand is the basic path to foreclosure. Actually, this process varies a bit from one state to another. But the overall process of a home being foreclosed upon goes something like this:

The homeowner begins to miss payments on the mortgage (defaults).

The lender will send notices of late / missed payments to the homeowner.

The homeowner may work with the lender to get caught up on back payments through such tactics as reinstatement (lump sum payment), repayment plans or forbearance.

If homeowner continues to default, the lender will begin the foreclosure filings. *

The homeowner may try to sell the home through a real estate short sale.

If the home is not sold via the short sale process, the lender will foreclose and make an announcement of a forthcoming foreclosure sale / auction.

The lender will attempt to sell the property at auction.

Eventually, the home will be sold to a new owner in some manner.

* This is one of the steps that vary from state to state. The process that lenders must go through to file for foreclosure and to actually foreclose on the home can take days, weeks or months, depending on the state laws.

This is obviously a simplified version of events, but it should give you a better understanding of the basic process in place here. Understanding this process is the first step to buying a home in foreclosure — in a way that leads to profit.

Why It’s a Good Investment

So now that you understand a little more about the process, you can begin to see the potential investment value of buying a foreclosure property. This is an expensive process for the lender to go through, especially when it goes all the way through the series of events to a real estate auction. So in most cases, the lender wants to avoid foreclosure as much as possible. That’s where the real estate short sale comes into the picture (see item #5 on the list above).

The short sale is a way to sell the home quickly while it’s still in the pre-foreclosure stage (not yet foreclosed upon). That way, the homeowner can avoid a big blemish on their credit histories, and the lender can avoid losing more money (by taking ownership, managing the property, paying additional fees, marketing the property, etc.).

So what is a real estate short sale and how can you use it to buy a home for less than market value? To answer this question, we have to look at the typical process of a home going into foreclosure (keeping in mind that this process varies from state to state).

You can learn all about the short sale process right here. But for now, suffice it to say that the home is typically sold for less than market value so that it sells quickly. That is the lender’s goal in the short sale — to sell the home quickly so that they can get the nonperforming loan off their books, not to mention eliminating the hassle of the home-foreclosure process.

So the short sale is one way in which a buyer / investor can get the property for less than market value. So that’s one of the ways buying a home in foreclosure can be a good investment.

At the Real Estate Auction

But what if the home does not sell via the short sale, and instead it goes all the way through to the real estate auction? Here too the buyer can often get a good deal. At a real estate auction, foreclosed homes typically start off at less than market value. And unless the bidders drive the price up by over-aggressive bidding, the home can still be acquired for less than market value.

In other words, buying a home in foreclosure can take place on the “front end” as well as the “back end.” You can buy the property through a short sale when it’s in the pre-foreclosure stage, or you can buy it through an auction after it has been fully foreclosed upon. Of course, with other investors trying to do the same thing, you won’t always have such options. But at least now you understand those options a little better.

The Silvano Group can help through a buyer’s agency agreement. We will follow each process to closing. We will negotiate price for you so you’ll get the best value for you money.