          
          
          
          
                               Real Bargains
          
               You're probably familiar with what has happened to
          real estate in the past few years.  Many properties such
          as homes and condos and shopping centers, have gone into
          foreclosure because borrowers failed to make loan
          payments and owners came up short on property tax.  In
          fact, the entire S & L crisis was triggered by real
          estate failures.
               Thus, a lot of real estate is now held by one-time
          lenders or municipalities who have become unwilling
          owners.  Often, the new owners are government agencies,
          from local taxing authorities on up to the federal
          Resolution Trust Corporation.  These government owners
          want to get the real estate out of their hands and back
          onto the tax rolls.
               Their frequent method of disposal is the auction. 
          Nearly $4 billion worth of real estate is sold at auction
          each year.  In the current economy, real estate bargains
          may be extraordinary. Buyers sometimes pay as little as
          50% of earlier asking prices.  In one Southern state, a
          buyer discovered a 40-acre ranch that was being auctioned
          by local authorities because property taxes had not been
          paid.  He bought the ranch, which included a modern
          house, swimming pool, and two-car garage, for under
          $10,000!  An appraiser put the value of the property at
          well over $100,000!
               The GSA, a major auctioneer of surplus property, is
          also heavily involved in real estate auctions.  Call or
          write your local GSA office and ask for a booklet that
          will give you the procedure to follow to order the
          regularly issued "U.S. Real Property Sales List." 
          There's no mailing list, so you need to send in the order
          blank from each issue in order to get the next one.
               Another government source for real estate is the
          U.S. Department of Housing and Urban Development (HUD). 
          When a borrower defaults on a Federal Housing
          Administration (FHA) loan and a lender forecloses, HUD
          buys out the lender and takes over the property.  Then
          HUD sells the property to the public.
               If you call your local HUD office, HUD will give you
          a list of designated real estate brokers in your area who
          will help you inspect properties and, if you wish,
          prepare bids for submission to HUD.  Sealed bids are
          accepted by mail; a 10% down payment is required.  HUD
          will pay the broker's fees.
               A similar situation occurs when Veterans
          Administration (VA) loans go into default.  The VA sells
          the homes via sealed bids, requiring a 10% down payment. 
          You may be able to buy directly from the VA without using
          a broker.  Call your state's VA office for their monthly
          listing.  Here's a tip:  Call early in the month, because
          that's when the lists become available.
               Finally, there's the S&L bailout to mine.  As you
          certainly know, many S&Ls have failed.  The "bailout" you
          keep reading about is not of the institutions or the
          stockholders, but of the insured depositors; they're the
          ones receiving federal money.  The government, through
          the RTC, tries to recoup whatever it can by selling S&L
          assets, principally real estate.
               The RTC typically tries to sell its properties for
          a price approaching market value.  All cash-deals are
          preferred, although in some cases the RTC will permit you
          to buy with as little as 15% down.  Properties that are
          hard to move or have relatively low values, however, are
          sold through public auctions.
               The Resolution Trust Corporation, set up by the
          government to liquidate assets of failed savings and loan
          associations, still has a lot of property for sale. 
          Today the RTC is making it easier than ever for
          individuals and small investor groups to purchase assets. 
          It's called the Small Investors Program.  And it's
          designed to provide the smaller investor better access to
          RTC offerings.  
               They have a special toll-free number dedicated to
          small investors, so you can have instant access to
          information about auctions, sales events and seminars,
          financing, and opportunities for minority- and woman-
          owned businesses.  Call RTC at (800)421-2073, and find
          out about their Small Investors Program.
          
               Check your local police, sheriff, and property tax
          offices, as well as local offices of HUD, the VA, U.S.
          Bankruptcy Court, and the Farmers Home Administration. 
          There are a slew of federal agencies that sell real
          estate acquired through foreclosure.  Some have been
          mentioned above.  Others include the following:
               * Federal Deposit Insurance Corporation (Regional
          Directors of Liquidation)
          
                    Marquis One Building
                    Suite 1400
                    245 Peachtree Center Ave. N.
                    Atlanta GA 30303
                    405 525-0308
          
                    30 S. Wacker Drive
                    32nd Floor
                    Chicago IL 60606
                    312  207-0200
          
                    1910 Pacific Avenue
                    Suite 1600
                    Dallas TX 75201
                    214  754-0098
          
                    2345 Grand Ave.
                    Kansas City MO 64108
                    816  234-8000
          
                    452 Fifth Ave.
                    21st Floor
                    New York NY 10018
                    212  704-1200
          
                    25 Ecker St.
                    Suite 1900
                    San Francisco CA 94105
          
          
               * Federal National Mortgage Association (Fannie Mae)
          
          
                    Fannie Mae Properties
                    P. O. Box 13165
                    Baltimore MD 20203
                    800  553-4636
          
                    3900 Wisconsin Ave. N.W.
                    Washington DC 20016-2890
                    202  752-7000
          
                    510 Walnut St.
                    Philadelphia PA 19016-3697
                    215  575-1400
          
                    950 Pace Ferry Rd.
                    Suite 1800
                    Atlanta GA 30326-1161
                    404  365-6093
          
                    One South Wacker Drive
                    Suite 3100
                    Chicago IL 60606-4667
                    312  368-6200
          
                    Two Galleria Tower
                    13455 Noel road
                    Suite 600
                    Dallas TX 75240-5003
                    214  991-7771
          
                    135 N. Los Robles
                    Suite 300
                    Pasadena CA 91101
                    818  568-5000
          
          
               * Federal Home Loan Mortgage Corporation (Freddie
          Mac)
          
               2231 Crystal Drive
               Suite 900
               Arlington VA 2202
               800  373-3343
          
               2839 Pace Ferry Rd.
               Suite 700
               Atlanta GA 30339-3718
               404  438-3800
          
               333 W. Wacker Drive
               Suite 3100
               Chicago IL 60606-1287
               312  407-7400
          
               Four Forest Plaza
               Suite 700
               12222 Merit Drive
               Dallas TX 75251
               214  702-2000
          
               15303 Ventura Blvd.
               Suite 200
               Sherman Oaks CA 91403
               818  905-0070
          
               These agencies sell some properties by auction, some
          through local real estate brokers.  Contact your local
          office for details.  You can also call your local office
          of the Department of Housing and Urban Development, the
          Department of Veterans Affairs, or the Farmers Home
          Administration, all of which sell foreclosed real estate.
               Want to buy raw land from the federal government? 
          The Bureau of Land Management frequently sells public
          lands.  For information, contact the bureau of 350 S.
          Pickett St., Alexandria VA 22304; telephone 703  461-
          1400.
               One excellent source for auction schedules and tips
          is Auction Opportunities Inc.  Call 800  551-5161 for a
          sample copy of its newsletter.  AOI recently reported
          that Resolution Trust Corp. is making a major attempt to
          unload the raw land in its inventory.  Land valued at
          less than $500,000 can be auctioned without a minimum bid
          while land valued at up to $2 million can be auctioned
          for bids as low as 50% of appraised value.  (Previously
          RTC demanded 85% of the appraised value in most land
          sales.)  Total RTC holdings of raw land topped $7
          billion, explaining RTC's rush to unload.
          
          
                               Getting Real
               It's certainly no secret that this real estate
          market has been in a free fall ever since the
          overdevelopment of the 1980s was capped by the 1986 tax
          reform, which eradicated many real estate tax breaks.  As
          a result, many lenders and loan guarantors now own
          properties that they'd rather not own.  Auctions are
          increasingly favored by lenders and by government
          agencies as a way to move these properties.
               For example, look at a recent auction of Federal
          Home Mortgage Corporation or "Freddie Mac" properties. 
          Over 500 homes were to be auctioned in six Northeastern
          states over a five-day period.  Before the auctions,
          there were open-house weekends and "free" bidders
          seminars.  As you can see, Freddie Mac is eager to unload
          its properties.
               The auction was "absolute," meaning no minimum bids
          were required.  To sweeten the deal even more, favorable
          financing terms were offered:
               * If you were a first-time home buyer willing to
          occupy the house yourself, you could buy with only 5%
          down and get a fixed-rate mortgage at 8.133%.
               * Other homebuyers willing to live in the home or
          use it as a vacation home could also buy with only 5%
          down, but the effective mortgage rate was 8.635%.
               * Buyers seeking investment property had to put 5%
          down and pay an effective mortgage rate of 9.193%.
               If you'd like a free catalog of Freddie Mac
          properties and information about financing, call 800 
          466-1155.
          
          
                           Crunching The Numbers
          
               As the ad mentioned illustrates, buying real estate
          is different for home buyers, second-home buyers and
          investors.  If you're buying a home to live in, full-
          time, your primary concern should be, "Do I want to live
          there."  Do you like the neighborhood, the schools.  Is
          it safe, accessible to work, shops and recreational
          facilities?  If you're comfortable with the area, don't
          buy until you've hired an engineer to inspect the
          property for structural defects.  Unfortunately, real
          estate that goes into foreclosure often isn't well-
          maintained, and a house that isn't kept up regularly may
          present serious problems, not always obvious from a first
          glance.
               If a house passes all the tests, it's time to crunch
          the numbers.  If you bid, say, $100,000, you owe a $5,000
          down payment if the seller wants only 5% down.  But then
          you have a $95,000 mortgage to carry.  How much does that
          come out to be, before and after taxes, each month?  How
          much are the other charges, such as taxes and insurance? 
          You can decide how much you can afford to bid if you look
          at the monthly charges you'll incur, but you have to do
          some sophisticated calculations beforehand.
               Buying a vacation home is a bit more complicated. 
          Again, you have to figure out if you really like the area
          and if you truly would spend weekends or summers there. 
          You need to have a structural engineer inspect the
          property and you need to go through all the calculations,
          just as you would with a primary residence.
               A vacation home, though, is an investment too. 
          Before you buy, you should try to learn if you'll be able
          to sell the property, if necessary.  A heavy inventory of
          unsold houses in the area will make your house harder to
          sell.  Ideally, you'll want to buy in a popular, growing
          region where real estate values are likely to appreciate
          over the years.
               You also may want to ask about seasonal rentals, if
          you decide to rent out your house rather than use it
          yourself.  Houses near a beach or a ski slope, for
          example, often command high rents in season.
               If you're buying investment property, the math is
          all-important, whether it's a house, a condo, or a
          commercial property (e.g., shopping center, office
          building).  Here, you need some assurance you'll be able
          to find tenants.  Otherwise, you'll have all the expenses
          of property ownership with no income.
               Moreover, you'll need some idea of how much rent you
          can reasonably expect.  Then you can compare your likely
          rental income with the amount of expenses you'll incur
          (mortgage interest, property taxes, maintenance,
          insurance) at various purchase prices.
               The trick is to buy at a price at which the expected
          income exceeds the expected expense -- what the pros call
          "positive cash flow."
               Some investors buy property even though cash flow is
          negative, figuring rents eventually will increase and the
          property will appreciate.  That's a trap a lot of buyers
          fell into during the 1980s, which is why there are so
          many foreclosed properties on the market today.
               Buying investment property likely will turn out to
          be more time-consuming than you imagine.  In return for
          your money and your effort, you should receive positive
          cash flow plus any appreciation.  Before you bid at an
          auction, do your homework to figure out how much you can
          pay and still enjoy positive cash flow.
          
          
                            Kicking The Bricks
          
               You shouldn't shop for real estate at auction
          without knowing some of the ground rules.  Auction
          notices generally appear in newspapers, either as legal
          notices or in larger ads in the real estate section.  If
          you see an ad for an appealing property, take a look at
          the property in person.  Ask local real estate agents
          what comparable properties will sell for.  Find out if
          the area has any social or environmental problems.
               Next, call the auction sponsor and ask for an
          appointment to inspect the interior of the property. 
          Unless you know a lot about construction, hire an
          engineer to conduct the inspection.  If you're buying new
          property from a developer, pay attention to any
          unfinished items and find out if the developer has a
          legal obligation to finish them.  Naturally, you should
          consult with an attorney to see if there are any
          questions about the property's title.
          
          
                               Giving Notice
          
               For real estate, cars, and other types of
          properties, how do you find out what's going to be
          auctioned?  As mentioned above, government auctions are
          advertised in newspapers.  In addition, auction notices
          frequently are located in post offices and city halls. 
          Many government agencies have recorded phone messages,
          with details on upcoming auctions.  These agencies also
          mail lists that notify subscribers of future sales.
          
          
