Thousands of foreclosures in metro Atlanta are creating plenty of opportunities for buyers seeking investment properties or homes for themselves.

Margie Smith, Harry Norman Realtors

Christopher Oquendo/Special

Spencer Curtis started investing as a way to sock away money for his kids' education.

But visions of purchasing a place for a song need to be balanced with a realistic view of what it actually takes to buy a foreclosure: caution, patience and flexibility.

"What you stand to gain is getting a house at a heavy discount, and I'll be honest with you, I have bought homes for less than 50 cents on the dollar in this situation," said John Adams, an Atlanta real estate expert and consultant. "Now, was it easy? No. Did I have to basically beat the bank over the head with the house until they were a bloody pulp? Yes."

There are three times to buy a foreclosure: pre-foreclosure, at the courthouse auction and post-foreclosure, also known as REO (real estate owned), when the property is in the hands of the lenders.

If you're successful, you often can get a discounted property, gain instant equity, and save cash on upfront costs, said Craig Christie, a real estate agent with Jenny Pruitt & Associates. But before you jump on a foreclosure, it's important to be financially prepared and have a strategy for closing the deal.

"You can expect to find good deals, but, as in anything, you have to be a prudent shopper," said John Williams, an agent with Coldwell Banker The Condo Store.

Real estate agents, experts and buyers shared their strategies for buying a foreclosure and how to avoid being taken for a ride.

The buying process

Bypass the auction if new to buying foreclosures or not engaged in real estate investing, Adams said. Risks include title problems, liens and inheriting other problems and unknown repairs. Also, cash is required to buy the house.

"The auction is a much more advanced technique, and quite frankly, it is almost impossible to fully protect yourself against some of the threats that are out there," he said.

The two other options are friendlier to the novice.

This involves buying the house from the property owners, who understand they're in danger of losing their house, their credit and any equity they may have built up.

"It's a difficult transaction and a lot of times it doesn't work out," said Cindy Simpson, a real estate agent with Prudential Georgia Realty. "We try very hard, but the problem is the clock is ticking before it goes to the (courthouse) steps, and there are a lot of hoops you have to go through. The bank has to approve it; you have to find out who is actually handling that property. That bank may have sold the loan to somebody else."

Adams said the good news is that folks in this situation sometimes hire an agent to try to sell the home before the courthouse auction. The agent can help set up the sale and prepare the owners for what to expect.

Most of the time, the owners can expect to gain nothing on the sale of their home. Often the loan amount still owed is greater than the value of the house. That creates a "short sale" situation in which some banks will negotiate a price less than what is owed on the mortgage in order to get some return, Williams said. But the transaction usually must happen very quickly to make it worthwhile for the bank to agree to the sale.

"That time frame is very short, and people have to be ready to move quickly when that happens. You can't have 30 days to get financing or 20 days to do an inspection. Pretty much the bank's going to foreclose in two weeks, and you've got a week," he said.

These are homes that weren't sold during the auction, often because the loan amount was equal to or greater than the value of the house, Adams said.

The banks will hire a local real estate broker who will plant a sign in the front yard, list the home for sale and basically say, "Bring all offers," Adams said.

A lot of people are scared because when they hear the term foreclosure, they think the house is falling apart, Simpson said.

"That's really not the case with the inventory we're seeing in metro Atlanta," she said.

Instead, some of the banks she works with are making some repairs on homes while trying to sell them.

"They want to help keep the neighborhood values in order, and they want to get owner occupants in there. They really don't want to have a lot of 'as is' fixer-uppers out there [attracting] another cycle of investors," Simpson said.

One reason why buyers who plan to occupy the home have an advantage when competing with an investor is because a resident owner is required to have substantially less equity at the time he buys than an investor would. As a result, his offer is generally 75 percent to 90 percent better than one by an investor, Christie said.

How fast banks respond to offers varies from 24 hours to within one week.

Banks generally hold firm on their pricing for the first 25-30 days, said Williams. The longer the house is on the market, the more willing banks are to negotiate. He recently sold a foreclosure in Norcross originally listed at $900,000 for $600,000.

"They won't let you steal it, but if it comes down to a few thousand dollars, they'll usually go with a good offer," Christie said. "They don't have any attachment to that house."

THE INVESTOR

Who: Spencer Curtis, 35, who works in medical sales.

Why he does it: The single parent has twin 16-year-old daughters. He started investing when he was trying to figure out how to pay for their education. A strategy has been buying foreclosures. He's also planning ahead and expects that one of the foreclosures he picks up is going to be his house some day.

How many he's bought: About five in the past year.

When he buys: After the courthouse auction.

His requirement: "Typically if I can't get it for 60 cents on a dollar, I won't touch it." Most of his purchases are less than $150,000, and he often turns them into rental properties.

Curb appeal — or not: Some houses are not visible from the road because the yard is so overgrown. "But you know the thing is, to me, what some people see as a mess, I see as an opportunity," he said.

Best advice for buying a foreclosure: Focus on a couple of ZIP codes and become an expert on sales of properties in the area. Before you make the offer, determine how much work needs to be done inside or out, Curtis said. "Typically I won't buy a house that needs more than cosmetic work," he said.

Negotiating tip: Be willing to go back and forth with the bank — it likely will work out in your favor. "It's happened on every house I've bid on," he said.

ONE ON THE MARKET

Asking price: $1.279 million

Address: 1678 Windsor Parkway, Atlanta 30319

County: DeKalb

Subdivision: Lanier Court

Features: 5 bedrooms, 5 1/2 baths

The story: This new construction foreclosure is slated to be completed, with a state-of-the-art kitchen and a master suite with a sitting room, fireplace and morning bar.

Agent: Margie Smith, Harry Norman Realtors, 770-365-8886

ONE THAT'S SOLD

The property: Three-bedroom, 2 1/2-bath Smyrna townhome in Westchester Commons with a master on the main and a two-car garage. Approximately 2,900 square feet.

Original price: $261,900, sold new by Pulte Homes in December 2000

When foreclosed: May 2007

Appraisal: $270,820, as of 2007

Sale price: $285,000 in August 2007 (seller paid $5,400 in closing costs). That's the cheapest sale in Westchester Commons in the past couple of years, with others selling in the high $200,000s-low $300,000s.

Notes: Property needed approximately $20,000 to bring it to excellent condition.

How it happened: The foreclosure sold in 16 days and received three offers close in price, said Bruce Ailion, a real estate agent with ReMax Communities who represents banks. He doesn't believe the former owner hired a Realtor before the foreclosure. "It always surprises me how few owners took the appropriate steps that would have prevented foreclosure and perhaps generated equity," he said.

THE OWNER-OCCUPANT

Who: Dave and Andria Weikel, and their two boys

What they bought: A four-bedroom, 2 1/2-bath home with a basement in Ball Ground, on 41/2 acres, this summer. "We looked at so many houses, and when I walked into this one, I knew immediately it was the one," Andria said. "It was very homey. They built it to look like an old home, but it's only 13 years old." The family moved from Sugar Hill, where they lived for 15 years.

How they found it: Listed for sale online. They didn't know it was a foreclosure until they pulled up with their agent and the sign said it was corporate owned. It was listed for $274,900.

How much they got it for: $259,000, and the bank paid the closing costs. They originally offered $255,000. "They did not accept it. But [they] encouraged us to make another offer," Andria said. "We did put in such a low offer that we saw that they were going to give it to us, but we had to go a little higher."

Big surprise: The home and yard were in good condition. But they had to pump the septic tank a week and a half after moving in. "That was a yucky surprise," she said.

Best advice for buying a foreclosure: Take advantage of public records to check out the history of the home. "The bank doesn't tell you anything," she said.

Negotiating tip: Prepare a list justifying the difference between your bid amount and the amount the bank is asking. Theirs included things like the cost of the termite bond and minor repairs to the deck and other areas. "We knew we would have to do things right upfront. Even though it was in good shape, we knew there were going to be additional expenses," Andria said.

HOW TO FIND FORECLOSURES

Look for these key words in the advertisement to find homes for sale pre- or post-auction:

Foreclosure

No disclosure

As is

Short sale

REO (real estate owned)

Special stipulations required

PREPARATION CHECKLIST

1. Get a pre-approval letter from a lender.

2. Examine home sales in the surrounding area to determine your offer.

3. Do an inspection. It will need to be done on a tight deadline.

4. Determine potential repairs and the costs.

5. Prepare an offer that includes extras, like the bank covering closing costs.