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RISMEDIA, July 17 2007—(MCT)—Across America and the Carolinas, the rate of home foreclosures has been rising. For many homeowners, too-good-to-be-true loans and all too easy access to credit have shattered the American dream. But their misfortune could be your economic windfall, provided you have some real estate savvy.

“That really stinks for them, but it was great for me,” said Jeff Hamrick, 41, who builds sets for TV commercials in Charlotte.

Hamrick bought a 3,000-square-foot foreclosed house in southeast Charlotte for $132,000 in November 2005. At the time, the average sales price in that part of the city was more than twice that at $287,831, according He’s fixing up the house and plans to sell for a profit or to borrow against to buy another investment property.

Investors have long turned to real estate — instead of or in addition to stocks or bonds — because they value its tangible appeal. But buying a home to live in is different than buying one to fix up and resell, hopefully, for a profit. It’s as different as buying a blue chip stock compared to a no-name start-up. That is, buying and flipping a foreclosed home, sometimes sight unseen, is risky.

“You don’t know what you’re getting sometimes,” Hamrick said, referring to the fact that buyers often bid on property at auction without having set foot inside.

Like other relatively riskier investments, foreclosures have the potential to bring quick profits but could just as easily be investment vacuums. Often those who are making mega money by flipping houses are deep-pocketed investors who buy significantly damaged houses.

“The profit potential typically goes down when the amount of work needed to be put into the property goes down,” said Rob Cassam, co-owner of Carolina Realty Advisors, a residential and commercial real estate firm in Charlotte.

Cassam and other experts agree that there is increasing interest among investors in foreclosed homes, especially in the local market.

“Charlotte’s such a different market from a lot of other places,” said Travis Van Hoy, a real estate agent with Allen Tate Realtors’ SouthPark office. Because of its consistent growth, he said, Charlotte is a popular investment location.

More N.C. families were threatened with losing their homes through foreclosure last year than ever before, according to a state report.

North Carolina recorded more than 45,500 foreclosure filings in 2006, according to the Administrative Office of the Courts in Raleigh. Mecklenburg County had the highest concentration — 35 per 1,000 homeowners, according to an Observer analysis earlier this year. Foreclosure filings are growing faster in most Charlotte-area counties than the state average. They’re up 13% in Mecklenburg, compared with 6 percent statewide.

“Right now is probably one of the biggest opportunities we’ve seen since I started investing 17 years ago,” said Peter Conti, author of “Making Big Money Investing in Foreclosures Without Cash or Credit.”

One foreclosure flipper’s story

Christopher Anzalone, 28, production planner for CD and DVD manufacturer in CharlotteTV shows on flipping houses sparked Anzalone’s interest. In the past year, he has bought four foreclosures. Anzalone and his parents jointly bought the first three, but he bought the fourth. Because he was new to the process, Anzalone said, he sought out houses in Charlotte that were in good condition. He has resold two of the homes, one at a loss but the other for a profit that made up for it. Anzalone says he’s still learning. For example, he overpaid on his first home.

Anzalone bought his first investment property close to downtown for $106,000 and sold it for $119,900. But he lost $2,000 after repairs and all other costs. He bought the other in northwest Charlotte for $98,000 and sold it for $125,000. He made $9,000on that house.
“To be able to go into something with no knowledge previously and make money is not bad,” Anzalone said.

He still is renovating the other two properties.

Anzalone has enjoyed the experience so much that he wants to make flipping houses his full-time job. He’s working on starting a corporation with his parents to buy and resell foreclosed homes.

He continues to watch the TV shows that got him hooked on his future career, but now with a more critical eye. The shows sometimes are misleading about profits because they don’t always subtract for costs such as renovation, closing and commission, Anzalone said.

“I still enjoy watching,” he said. “But when you watch those shows, you can tell which ones are being more realistic and which ones aren’t.”

Interested in flipping a foreclosure?

It’s a complicated and risky investment. You’ll want to study up before you jump in, but here are some basic factors to consider.

To find a foreclosure, you’ll want to tap one of a few key sources.

You can view foreclosure records at the county courthouse.

To find homes available from the U.S. Department of Housing and Urban Development, go to The HUD site provides more detailed information, listing the house’s size and year built and room information, such as number of bedrooms and bathrooms. It also lets you know if a property has been sold and for how much.

A local real estate agent with foreclosure experience can watch for soon-to-be-listed and newly available properties and ensure you are not chasing an already sold house.
To bid on a HUD home, you must work through a HUD-certified real estate agent. Its Web site lists agents by area.

Research the property before bidding.

The amount of research you can do depends in part on how you will be purchasing the property. If the house is being sold at a courthouse auction, you won’t be able to see inside it ahead of time. Of course, you can do a drive-by.

If the house is being sold through a broker or through HUD, chances are you can get inside.

Either way, you might not get the full picture on the property because you won’t be able to ask the former owner questions, such as when the kitchen was remodeled. Try asking neighbors instead.

Research the neighborhood.

“It is somewhat hard to compare apples to apples with foreclosures,” said Robert Gates, owner of Gates Real Estate and Auction Group in Lincolnton and a foreclosure buyer.

Look up tax records for information on the size and value of the home and the lot you are considering as well as past sales in the neighborhood. This info will help you determine if you are getting a good deal.
You may have to weigh a property in an area that has had steady growth with a one in an area that could stay stagnant or flourish.

Talk to a lender before bidding.

It might be harder to get financing for a repossessed home because the bank is taking a bigger risk than it would in a standard home purchase. The rate on your loan likely will be higher than it would be if you were purchasing the house as your primary residence.
Hire a lawyer to do a title search on the property.

You want to make sure that no prior owners have a claim on the property. Later, if you decide to buy the foreclosure, you might also want to purchase title insurance to protect yourself from other claims on the property.

Hire a home inspector — if you have access to the house before buying.

Keep in mind foreclosed properties are sold as is. You will want to know if you could be on the hook for major repairs. Before you get your heart set on the house, know that repairs could be significant.

“If (the previous owners) didn’t have money to pay the loan, they didn’t have money to take care of the house either,” said Irl Dixon, a broker for Coldwell Banker Real Estate Corp. in Belmont.

If you end up buying the property, you might also want to get a home warranty to cover unforeseen repairs for the first year or so.

To make your bid, contact your agent or head to the courthouse.

If you plan to flip a HUD house for profit, remember that you don’t get first dibs at auction. The first 10 days of the auction period are reserved for people shopping for their primary residence.

If you are going to a courthouse auction, you can either go on the day the property is auctioned or wait until after the auction and top the high bid. Each new bid must exceed the former bid by 5%. The property closes when there are no upset bids for 10 straight days.

Many real estate investment veterans say that courthouse auctions are the riskiest investment for inexperienced investors. It can be a challenge to pit yourself against seasoned pros and come out ahead.

Copyright © 2007, The Charlotte Observer, N.C.
Distributed by McClatchy-Tribune Information Services.