Securing real estate deals is progressively getting harder in many markets. Many fortunes were made in the last downturn where real estate investors took advantage of the many bankruptcies that occurred and secured properties at a fraction of the cost. In real estate, your profit is locked in as soon as you purchase the deal. Meaning, depending on the deal you got, your profit is made on the difference between your purchase price and what the value of the home is eventually appraised to. For those interested in taking advantage of bankruptcies, it is a lucrative strategy to secure properties with more competitive pricing. To best invest in real estate bankruptcies, it is best to follow several best practices during the process. 

Searching For Bankruptcies

When starting the process of investing in real estate, the first step in the process is always searching. The challenge with bankruptcies is that it is not always so simple as looking on Zillow or through the MLS. Usually, most courts post notices of sales on their websites. Another alternative is searching on Loopnet.com. Although focused on the commercial side of real estate, there are still some residential-style properties that may be found in your state. Loopnet.com offers a filter for bankruptcies that should help with the search. Finally, there are listing services that you may have to pay for such as inforuptcy.com that offer listings at a price. 

Contact The Bankruptcy Trustee 

After your search, if you nailed a listing that you are interested in, then the next step in the process is contacting the bankruptcy trustee. To find the name of the trustee handling the deal for a debtor, you can visit pacer.gov. Further contact information is available for every standing Chapter 7 trustee on justive.gov. By reaching out to the trustee, you can find out if they may be interested in selling the property. A broker is not always required and the trustee may be able to sell you the deal on their own. Usually, the trustee lawyer will have the terms that are needed to obtain the trustee’s consent and bankruptcy court approval. 

Submit a Purchase Offer To The Bankruptcy Trustee

Depending on the trustee, they will accept the offer if deemed sufficient. You can be presented to the Bankruptcy Court as the proposed buyer in a motion to approve a sale under 11 U.S.C. Section 363. Make sure that the trustee finds both the price and the terms sufficient.

Cash Is King

Bankruptcies by default keep many investors away that don’t have the proper funding to secure the deals. If you plan on investing in a bankruptcy deal then be best prepared to use cash to secure the deal. Most lenders don’t want to touch bankruptcies as they are deemed a bit risky for their lending criteria. If you need cash, alternatives include using a line of credit or securing a hard money loan from a private lender. 

Overall, bankruptcies are probably not for the beginner investor. However, they present a very profitable opportunity for those that want to secure properties at a fraction of the cost and are willing to go through the process. If done right, bankruptcies can help you add on a few extra deals per year towards your portfolio.