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Finding Your Dream Retreat: It is Time to Watch the Foreclosure Listings

I often get e-mails from readers, complaining that the retreat properties that they see listed are too expensive. Typically is something like: "I found a couple of good places, but they are beyond my reach." Here is one possible solution: Buy on the other guy's weakness. There are lots of foreclosures now on the market, and the foreclosure rate is expected to increase as the real estate bubble continues to deflate, and as the US economy slides into recession. (In my estimation, here is the equation for the next four years: Recession equals lay-offs, and layoffs equals missed house payments, and too many missed house payments equals foreclosures.)

One recent newspaper headline read: Metro Areas in Michigan, California, Nevada, Ohio Had Highest Foreclosure Rates in 2007. But not all of the foreclosures are in the big cities. Take a look at one of the foreclosure listing and alert services like Foreclosures.com or RealtyTrac.com. These services have a surprising number of listings in rural areas. With the residential real estate market now in a confirmed downward spiral, the time is getting ripe to watch for foreclosures. Down and down prices go. Bill Bonner of The Daily Reckoning recently mentioned: "In 2007, 17.5% of all the houses sold in Nevada were ones that had been foreclosed. The figure was 15% in Colorado and 11% in California. These foreclosed house sales are pushing prices down further." Bonner continues, "As prices go down, more people are tempted to walk away from their mortgages and their homes. Bloomberg provides an estimate: by the end of
this year, 15 million U.S. households will be “upside down,” meaning, their houses will be worth less than the value of their mortgage loans. Almost half of the people who took out subprime loans over the last two years have no equity in their houses, says Bloomberg. And of the people who bought two years ago, 39% are already upside down." Someone is going to benefit from all these tales of woe. (It certainly won't be the banks. They'll be lucky if they break even.) But someone is going to be buying some real bargains.

If you want to try finding a retreat property via a foreclosure sale or auction, keep in mind the following dos and don'ts:

1.) Do your homework. Study the markets in your planned retreat locales, in detail. Study the microclimates and soils. Ask a real estate agent in your target area to provide you with a print-out of the actual closing prices (often called a "realized price sheet" or just a "closings sheet") for the county for the past year.

2.) Do pay attention to Multiple Listing Service (MLS) numbers. These numbers are typically assigned sequentially. The lower the number means the longer that a property has been on the market, and hence more likely you are to encounter a "motivated seller." (In today's depressed real estate market, you can now translate that as "desperate seller.")

3.) Don't get caught in the same trap as the previous owners. Don't buy beyond your means. If you can't make the payments, then you will lose the property, just like your predecessor. Don't just assume that you can find a job when you move to the hinterboonies. (Maybe that is just what the previous owner thought!) I recommend building up a home-based business before you move. If at all possible, borrow any money needed within your family, rather than from a bank. Alternatively, pool funds with like-minded preppers, and break up a large parcel. (In my experience, joint ownership of retreats is problematic. Just split it up into contiguous parcels with title held by individual families. Yes, surveying and subdividing is expensive and time consuming, but at least there are no hard feelings in the long run. I 've seen all sorts of grief, under other arrangements.)

4.) Don't compromise on location. As I mentioned in my book "Rawles on Retreats and Relocation", you should avoid both resort areas and channelized areas. Look for lightly populated dryland farming regions that are well-removed from major metropolitan areas, and that have good soil and plentiful water. (Even without buying my book, you can see a lot of my advice on retreat buying criteria and recommended locales at this web page.)

5.) Don't rush into buying the first likely candidate property. Watch and wait for a property that is both in a good retreat locale, and is a bargain.

6.) Don't hesitate to sell now, if you know for certain that you'll be moving within three years. If you need to sell your current property to provide cash for the eventual purchase of a retreat, then consider that the urgent item on your agenda. Prices are falling and buyers are scarce, so price your property accordingly, to be sure that it will sell quickly. Rent for a while. (Perhaps even "rent back" your house from the new owners.) Let the new owners worry about its declining value. After you've liquidated, you'll be sitting on cash in the midst of a declining market--a true "buyer's market". At that point you can afford to take your time, be choosy, and drive hard bargains.

7.) Don't be afraid to put in a lowball offer. If a property is "bank owned"--I love that euphemism--then they might be willing to sell it at a loss, just to get it off their books.

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