Alexis McGee says foreclosure investors can be heroes.
McGee, 46, is president of Foreclosures.com. Last month her book, “The Foreclosures.com Guide to Making Huge Profits Investing in Pre-Foreclosures
Without Selling Your Soul” hit store shelves.
   She says investors can help distressed homeowners avoid foreclosure while also making handsome profits on most deals. They do this by providing homeowners free advice and then taking over their mortgage if that’s the best option for the owner. 
   Here are some questions she answered:

Q. I’ve heard from several readers interested in making money on foreclosures. But in a market of soft home prices, that seems like a risky strategy. Shouldn’t people wait until the market bottoms out before trying this? Couldn’t they be chasing a falling market?
A. Trying to “time” any market is simply asking too much. The key is to know what kind of market you are in, buy it right, fix/price the property to sell quickly in that market, and get in, get out and put your 15 percent profit in the bank. If you stick to entrylevel housing, in good neighborhoods, with minimal rehab time, at the right price, you will reduce your market risk dramatically.

Q. In the book you really emphasize buying a property before a foreclosure auction. You recommend taking over the loan of someone in default or about to default. What are the risks of such a strategy and why do it that way?
A. This is called “subject to” financing. It’s been around a long time. It’s a great “bridge loan” to use when quickly acquiring property. I do not recommend it to be used on any “hold properties.” Your risk is the underlying lender can enforce their due on sale clause and call the loan, and file a notice of default. If this happens you will need to:
   Ask the lender to assume the loan, do a complete loan package and pay their origination fee (estimated 1 percent).
   Find a new lender and refinance the underlying loan.
   Sell the property before the lender completes its foreclosure process. (Varies state by state, but in California, no sooner than 111 days from when they file the original default.)
   The risk of the above is very slim, especially when you have a bad loan now current.
   (Editor’s Note: McGee explained “subject to” financing as the process of negotiating with an owner, including the costs of the mortgage and any other debt or liens against the property.)

Q. What’s your best advice for someone who wants to invest in foreclosures, especially in Orange County?
A. Stick with entry-level housing for your area, in good neighborhoods, that need minimal rehab, and make sure you buy it right, and price it to sell right, and you will make money in any market … up, down or sideways. Don’t be afraid to jump in when others are running scared. This IS when the best opportunities present themselves. But be selective and make sure you get them at the right price, as I’ve outlined in my book.

Q. Let’s talk about your Web site, which lists foreclosure filings and has maps. How do you get the data? Do you pull notices of default from the Orange County Clerk-Recorder’s Office?
A. We collect the notice of default, notice of trustee’s sale, and trustee’s deed filings from the county recorders’ offices and add tax assessor, maps, and other databases to give you a complete quick snapshot of each property.

Q. How often are notices of default added for Orange County? How long do they stay on the site?
A. We record properties on our site once a foreclosure notice was filed. We do not remove them from our site, as we have historical data – “related notices” – that allow you to see all notices attached to one property, going back two years now. That helps you identify folks who have been in and out of foreclosure, so you have a better picture of their situation

Q. When will be a good time to buy REOs, and what should investors offer?
A. I would say in five to six months at least. My formula is simple. Add what things cost and deduct from (estimated) resale, factoring in 15 percent profit. You have to know what the house is worth. In a soft market, that’s tricky. Sixty to 70 cents on the dollar is where it ends up. It’s different for every property. If the bank is only giving you 85 cents, it’s not worth your time.