Now for the million dollar question…considering all the negative economic news and talk of the pending double dip occurring, does the buyer take a chance to buy foreclosed property to rent out or resell in the future? What do you think?

Start with the federal laws. Those will usually trump most state laws, unless the state laws are more in favor of protecting the tenants.  When you buy a foreclosed home that is occupied, make sure you understand how the occupants are protected under The Helping Families Save Their Homes Act of 2009. If the current tenants were not the owners who were foreclosed on (or family members of the owners), you’ll need to give them 90 days notice of eviction if they were renting month-to-month.  However, if they signed a lease, then you will have to allow them to stay until the end of their lease. An exception to this is if you are planning to live there yourself, in which case, you just need to give the tenants 90 days notice of eviction.

Once you’ve figured out what to do about the current renters, it’s up to you to decide whether to sign a new lease with those same renters or find new renters. In either case, you will have certain responsibilities as a landlord, and those will vary by state. Here are some things to keep in mind if you’re planning to become a landlord in the state of Michigan:

• In Michigan, landlords must start the eviction process by filing a “Notice to Quit”, which will determine the number of days a landlord must give to a tenant to make them aware of eviction prior to filing a complaint and summons. The minimum length of a “Notice to Quit” is seven days for nonpayment of rent. The minimum length of a “ Notice to Quit” for termination of a lease is usually thirty days. The landlord can then file a complaint and deliver a summons to the tenant. After ten days, if the tenant has not vacated the premises, a “writ of restitution” is produced by the court sheriff, which will restore full possession to the landlord.

• If you’re a landlord and fail to notify your tenant with a notice of damages within thirty days after lease termination, you must immediately refund the full security deposit to the tenant, and no damages are due. If you feel that you have a disputed case to claim the security deposit or charges, you have forty-five days after termination of occupancy to file a suit against the tenant. Learn more about security deposit laws in Michigan.

• You, as the new property owner, are responsible for the maintenance and upkeep of the property. Be sure to respond within a suitable amount of time and address any legitimate issues appropriately. In fact, be proactive when you first take ownership and ask the tenants if everything is working properly. For more information about maintenance responsibilities and rights to inspect, read about the Landlord Right of Entry Laws in Michigan.

• In most cases, you can raise rent in Michigan as you choose, but there are some rules, such as you have to give the tenant, you guessed it, written notice. Here are some other rules surrounding raising rent in Michigan.

• An important Michigan state law to keep in mind when buying a foreclosure home in Michigan is one that gives borrowers whose homes are foreclosed on a statutory Right of Redemption. This means that the borrower who lost his or her home to a foreclosure has the legal right to buy back the home within one year if they pay off the full amount owed at the time of foreclosure, as well as any other liens, taxes, interest, and fees incurred by the lender to foreclose on the home.

Of course, there is a lot more information out there to be learned. Make sure you are diligent about learning your rights and your tenants’ rights at the federal, state, and local level. Renting out a property can be a great investment, but you have to know the property and laws before you really know what you’re getting yourself into as a landlord and an investor.

Links to More Information about Federal and Michigan Rental Laws:

Get more info about tenant and landlord laws in Michigan

Read about tenant rights, laws, and protections in Michigan on HUD.gov

Check out the National Low Income Housing Coalitions’ Renters in Foreclosure Toolkit

So what do you do? Do you still purchase the property? Well, that depends on the risk involved and how much of a risk taker you are. An occupied property can still be a great investment. You hear horror stories, but like most things in life, if you know what you’re getting into, you can prepare yourself and make it work. Or, you can make an educated decision to back away from the investment. Here are a few tips to help you minimize the risk involved and maximize your chances to land an awesome deal and bank some good money.

Find out what you can about the current renters.

This involves some investigation and asking many questions. Do the renters know the home is in foreclosure yet? Will the renters allow you and/or your real estate agent to inspect the home? Are you able to see a copy of the lease? If so, when does the lease end? Have they been on time with rent payments? Find out what you can about their situation and whether or not they have a criminal background. If they have no other options for a place to live, are unemployed, etc., they may be desperate enough to do something drastic like steal the appliances or something. Asking these questions will help you make an educated decision on the likelihood that the tenants will be cooperative or not.

A few hours of research and investigation will go a long way.

Before you think about investing in an REO home, learn about your state’s foreclosure laws to avoid, or at least prepare for, headaches along the way. For example, some states have what’s called a Right of Redemption, where the person who defaulted on the home (that was foreclosed on) can buy the home back after the foreclosure process has begun (before or after the sale, depending on the specifics of the state law).

Smart renters will know their rights. Even not so smart, but desperate, renters will know their rights. Smart investors will also know tenants’ rights. You don’t have to be a lawyer. You just need to do a little bit of homework and find a good real estate agent who has experience with REO properties. The U.S. Department of Housing and Urban Development (HUD) has a lot of great information on their website organized by state. For your homework, go to HUD.gov to learn about tenant laws in your state .

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There are several potential problem spots you should check when you’re considering REO homes.  If you live in the area, you can check most of these yourself, but hiring a Home Inspector is preferable.  For just a few hundred dollars, they can do a thorough inspection and give you a detailed report on the condition of your REO home.  You may be pleasantly surprised to get a report stating that everything is up to code, water-tight, and in great shape.  It’s well worth the peace of mind you’ll gain to pay a small fee for the inspection.

If you get a less positive home inspection report, it can help you determine whether the house is right for you.  If you’re looking at foreclosed homes for sale in your area and the prices are well below market value, you may want to buy a house and fix any problems yourself or hire a contractor.  In many cases, the problems found by a home inspection can be readily fixed and you’ll still pay less than you would for a home for sale by the owners or through a standard real estate listing.  If the repairs needed are overwhelming, however, you can decide to walk away without bidding on the REO home you’ve been looking at.  Fortunately, there are currently thousands of foreclosed homes for sale, and the next one you look at may be the perfect one for you.

Trouble Spots for Home Inspections

There are a variety of signs there could be trouble in your home.  Knowing what to look for is the first step:

• Mold isn’t always visible to the naked eye, but it is difficult to get rid of, so be sure you look for mold in basements, any rooms that are damp or have had leaks in the past, and in the attic, where insulation can become moldy after a roof leak.  You can purchase mold testing kits that are easy to use at many home improvement stores.
• Gutters can protect a home or cause problems.  Make sure the gutters are large enough and properly installed so water doesn’t overflow and run under the roof or down the wall of the house, which will cause moisture problems in your basement or foundation.
• The location of plants is also crucial.  If plants are closer than 18 inches away from the outside walls, they could draw moisture into the walls.
• Drains that are noisy, making a chugging sound, are an indication of inadequate venting.  A plumber will need to correct this problem right away.
• The attic can be the location for a number of issues, including inadequate ventilation, trusses that are the wrong size or even missing, roof leaks, poor insulation, faulty wiring, or mice or birds that have taken up residence.

If you’re inspecting REO homes yourself, don’t be afraid to ask questions and point out areas that you feel are potential problems.  Get an estimate that shows what the needed repairs will cost, then decide if any of the REO homes you’re considering are worth the investment.  If your inspection hasn’t uncovered any major problems, you can rest easy knowing you’re getting a beautiful house that’s a definite bargain!

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Some people are simply ceasing to pay their mortgages and are fighting tooth and nail whichever institution holds the mortgage on their home, including hiring lawyers who file legal papers asking the mortgage holder to provide legal proof that do, indeed hold the mortgage. This tactic is proving very effective in forestalling foreclosure since most mortgages are sold by the original issuer to second parties. Another factor working in favor of those fighting home foreclosures by banks is the sheer volume of homes that have been foreclosed on. According to a recent article in The New York Times, more than 1.7 million American homes have had foreclosure proceedings initiated against them. The courts are completely buried in a backlog of foreclosed home cases, the mortgage holders’ collections departments are overwhelmed, and some Americans are taking full advantage of that situation by staying in homes they don’t pay for as long as they possibly can. If you’re facing the prospect of foreclosure, or have already had your home foreclosed upon, here is some food for thought: in 2008, your average homeowner who was delinquent on his or her mortgage had been delinquent for around 251 days before eviction. Right now, given the huge volume of delinquent mortgages, it takes mortgage holders around 438 days to evict you. That’s more than one year, ample time for almost anyone to build up their savings and make other living arrangements. Know more on bank foreclosure listings.

Ultimately, what created this situation was mortgage lenders’ greed, their predatory lending practices, and their inflexibility in dealing with generally honest, honorable homeowners who might have been hit with high medical costs, a personal disaster, or simply losing their jobs and being able to find another one that paid nearly as well. And while people playing the waiting game with their mortgage lenders in the hope of improving their cash flow will pay the price when they are finally the victims of bank foreclosures. Their credit will be ruined and they may be unable to obtain any credit in the future, or if they do, they’ll pay premium rates for any credit cards that they can obtain. Like any situation, there are advantages and benefits to playing this dangerous game. Since most people do need credit, you have to ask yourself: do the advantages outweigh the risks? For most sensible people, the answer is probably a resounding “No”.

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You should also talk to your insurance agent about coverage limitations.  Many people assume that if they have homeowner’s insurance, they are protected against any kind of disaster, no matter how way-out or unusual, that could affect their home.  In fact, most policies have several exclusions that can catch homeowners by surprise.

Flooding is one of the better known natural disasters that isn’t covered by a standard home policy.  Fortunately, you can purchase separate Flood Insurance that is backed by the federal government.  In fact, if you live in a high risk area, flood insurance is mandatory for all houses, including foreclosed homes, that have a mortgage through a federally funded or insured lending institution.  The For more information, you can visit www.floodsmart.gov.

Are you covered if your REO property is hit by a tornado?  What about an earthquake?  Surprisingly, most homeowners insurance will pay for tornado damage, but not earthquake damage.  Other weather related disasters not usually covered are mudslides and sinkholes.  You may not think that’s a big concern, but neither did the people in Guatemala affected by this sinkhole in April of 2010: http://www.businessinsider.com/giant-sinkhole-guatemala-city-large-2010-5.  Tornado and hurricane coverage, however, is usually included.  Talk to your insurance agent to find out which natural disasters aren’t covered and how you can insure your foreclosed home purchase against them.

Mine Subsidence is one of those terms you may never hear or have to worry about unless you buy privately sold or REO property in Pennsylvania or another state with lots of abandoned coal mines.  When these underground mines collapse, homes built on top of them often shift, collapse, or sustain damage to their foundations, making them unsafe for habitation.  If you have a home in a coal mining region, consider buying state funded mine subsidence insurance.

Surprisingly, in most cases you’re protected if a falling object lands on your house.  This means your policy will pay for repairs if a tree or even an airplane lands unexpectedly on your house, but it can protect against more unusual problems.  Falling satellites and meteorites are two unusual disasters you’re probably protected against with a standard policy.

There are plenty of other unusual disasters that could strike your home.  If you live in Hawaii it could be a volcanic eruption, while you may worry about damage from livestock or stray animals if you live in cattle country.  Don’t assume you’ve properly insured your foreclosed home until you review your homeowner’s policy carefully with your agent.  It’s better to know what isn’t covered and purchase additional coverage than find out when disaster strikes.

Imagine purchasing a home that is being sold by a celebrity. It sounds impossible, doesn’t it? After all, celebrities have expensive mansions and you can barely afford the reo homes that you’ve been looking at. However, getting a fancy home just might be more plausible than you think. That is because celebrities, along with many other people, are taking advantage of something called strategic foreclosures to get rid of their homes. Smart homebuyers can purchase these homes at a much lower price than ever before.

What exactly are strategic foreclosures? Well, when we think about foreclosures, we think about people who have struggled to try to make their mortgage payments but who just couldn’t do it. The bank takes their property and puts these newly real estate owned homes up for sale for a low price. However, there are some people who actually make the conscious decision to allow the bank to take back their properties. They look at their options and realize that trying to keep or sell the home is going to cost them a lot of money. They choose to stop making payments even though they might be able to afford them and decide to let the bank take the home. This is called a strategic foreclosure.

A surprising number of celebrities are using this method to get rid of properties that they no longer want to keep paying for. A large percentage of other people who have nice homes that they don’t want to foot the bill for are also choosing strategic foreclosures as a way out. What does that mean for you? It means that there are a lot of very nice homes coming on to the market today and they’re available at rock bottom prices.

Although the houses are fancier, these strategic foreclosures are really just normal repossessed homes. The bank has taken control of them because payments were not made on them. What is important to understand is that the bank doesn’t really want to own homes. It wants to sell those homes and collect payments on them. Therefore, the homes become available at very low prices so that the bank can offload them. When someone essentially gives their home to the bank in a strategic foreclosure, the bank offers it to homebuyers like you at a low price. One man’s strategic foreclosure just might be the treasure that you’ve been seeking.

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It seems like it has been a very long time since we heard any good news about the housing market. For years, the real estate market has been suffering and homeowners have been suffering along with it. However, we’re finally starting to see a glimmer of hope on the horizon. There are indications that the housing market might finally be healing. If that is true, now could be the perfect time for potential homeowners to take advantage of the changes and purchase a home.

One big indicator that the housing market is healing is that prices on homes have stopped declining. For years, prices just seemed to creep lower and lower. People were forced to sell their homes for a fraction of what they paid for them because they couldn’t hang on to them any longer. This decline finally appears to have leveled off in most areas. This suggests that we’re on our way to turning things around.

Another good sign for the housing market is the fact that mortgage help and tax credits have both become more widely available to potential homebuyers. People who are interested in buying a home now are in a position to receive the support that they need in order to make this type of big purchase. As this support continues to fall into place, more and more people will be interested in buying homes. As that happens, bidding wars on low-priced homes will flare and home values will rise again.

If you’re interested in using housing trends to your advantage then it is important to pay attention to the fact that the housing market seems to be on the rebound. Now is the time to consider purchasing a home. If you wait too long then prices will have climbed again. It is unlikely that home values will continue to decline in most areas throughout the nation so it doesn’t make sense to hold out any longer if you’ve been thinking about buying a home.

Your best bet for getting a great price on a new home right now is to look at bank owned properties. These are repossessed homes that are owned by banks and are now up for sale. They are available at very low prices because the banks are eager to get rid of them. Purchasing one of these homes now means that you get the lowest price possible on a home to live in. As the market continues to heal, the value of your home will rise and you should be able to turn a tidy profit on the future sale of this home.

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Buying a Foreclosed Home can be a real bargain, but being aware is the first step to making your purchase profitable!

Right now in 2010, there are hundreds of thousands of foreclosed houses flooding the home resale market. One of the best reasons for buying foreclosed homes is to take advantage of low prices, and to obtain a bargain price on a great home. There are several factors to consider, however, before purchasing a foreclosed home.

Factor in repairs and upgrades to your decision:
If a homeowner is being unwillingly driven from his or her home by a foreclosure, that person has no incentive to maintain the home, and may even vandalize it to get back at the bank or other lending institution that is taking the house. It’s important to factor into your purchasing decision the requirements to get the home back up to a livable standard. Are there fixtures and appliances missing? How about damage to carpet, drywall, garage doors, and landscaping? Make a list and determine the out of pocket cost associated with these repairs, because more than likely your lender won’t lend you the money to fix the repairs.

Find out how much the foreclosed buyers paid for the property and the amount of the note:
Buying a foreclosed home may be a real bargain because the bank that owns the property may want to recover some of the money from the mortgage and won’t be too fussy about who buys it. You could wind up getting a great home for a very low price. If the seller is really motivated to unload the property, you may be able to wring some concessions from the seller such as a further price reduction or money for repairs. It never hurts to ask for these things, since you may wind up getting more than you imagined from the seller, and knowing the price of the note the bank currently holds on the property will help you in negotiations. Depending on the state in which you are purchasing the information should be of public record and available online. Search online for the clerk and recorders office to find this information.

Research online to find the best deal:
One of the drawbacks to buying a foreclosed house is that they are not advertised through regular real estate channels in most cases. You should start your search online to find a website that specializes in foreclosures to learn about their availability. By searching online you can be on the lookout for the perfect house. Don’t get discouraged. If you want a fireplace, a patio, or a block wall around the backyard, you may have to add those features yourself. But, if you get a really good price and some money from the seller for repairs, the home could come with enough funds to customize it exactly as you want.

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What research have you done in your home search? Any additional tips or suggestions?