Hit-and-miss advice on foreclosures

“HOW to Make Money on Foreclosures,” by Denise L. Evans, is at best an uneven how-to book.

The author, an attorney who has practiced in Texas and Alabama, is very savvy about foreclosure procedures. But some of her recommendations could mislead foreclosure buyers.

To illustrate, she suggests that a buyer of distressed property offer the defaulting owner a lease with an option to buy the home back. In several states, that is considered a mortgage loan, not a property sale.

Although a minor point, the author says title insurance doesn’t insure against forgeries in the chain of title. In fact, deed forgeries are the No. 1 cause of title-insurance company losses.

This is a good, basic book about investing in foreclosure properties. It includes lots of information buyers of distressed properties need to know. However, it doesn’t clarify when the best time is to buy during the foreclosure process.

Evans doesn’t reveal when it’s smart to buy before the lender’s foreclosure auction, when bidders should purchase at the foreclosure sale or when it is wise to wait until after the foreclosure sale and buy from the foreclosing lender who took the property back because there were no bidders at the auction.

Yet, some insights are superb. For example, Evans writes, “I’ll let you in on a secret about lenders: It’s easier to borrow millions of dollars to buy a shopping center or office building than it is to borrow $200,000 for a four-plex. The larger the loan, the more likely the evaluation will be based on net operating income and not the borrower’s credit score or income. Don’t think too small when looking for investments. Don’t be afraid of banks.”

This book is worth reading if you want to buy foreclosure property. But read everything with a grain of salt. The author has lots of good advice, and some that isn’t.