Take Advantage of Foreclosure Investing

5 May

It seems that more and more foreclosed properties are popping up all over the place; it’s no secret that the foreclosure market is at an all time high. Opportunities for investing in real estate foreclosures are huge due to the increased volume over the last couple of years, and it appears that this trend will go on as homes continue to face foreclosure.

The foreclosure process contains three stages: pre-foreclosure, foreclosure auction, and bank owned properties or REO. Each stage in the foreclosure process can prove to be extremely profitable to the knowledgeable investor when creative real estate investing techniques are applied.

Pre-Foreclosures with Short Sales

Investing in pre-foreclosures with short sales has never been more profitable than it is today. This type of strategy involves just the real estate investor, the homeowner, and in some cases the lender. Because the homeowner has been delinquent on their mortgage payments, they are now in a position to accept offers made by investors. Short sales allow real estate investors to discount the loan from the lender, often purchasing the property for much less than it’s worth to avoid foreclosure. In addition to enjoying discounts, you can also expect very little competition from other investors when buying pre-foreclosed homes. This is a must-know technique if you want to be competitive in today’s foreclosure market.

Foreclosure Auction

The foreclosure auction can also be a very rewarding place for smart real estate investors. There are huge investment opportunities with discounts as high as 50% market value. When buying foreclosed property from the auction, it’s important to know the steps involved to maximize your profits and to have an overall good experience.

The properties are auctioned off to the public and the highest bidder walks away victorious. This can be very rewarding to those who are in a position to buy the property within a short amount of time, but can also be devastating to those who bid without proper prior financing. Most auctions require a small deposit down of the purchase price on the spot, then the remaining balance usually within 1-30 days. It’s crucial to make sure to have your deposit ready and your financing in order before you bid! If for some reason an investor is unable to get financing within the allotted time, they will most likely lose their down payment along with their auctioned property. Buying foreclosures at the auction is by far the riskiest place to pick up a foreclosure because you are buying the property “as is”. To avoid potentially catastrophic problems, it’s very important for investors to do thorough research before bidding on a property at the foreclosure auction.

Bank Owned Properties or Real Estate Owned (REO)

Bank owned properties, commonly referred to as real estate owned or REO, are one of the most common foreclosure investment practices today. These are homes that have passed through the foreclosure auction without any bids and have now become a bank owned property, or bank foreclosure. Buying foreclosures that are REO primarily involves only the lender. Since lenders don’t want to have excess inventory, they are constantly listing properties that have come back from the foreclosure auction in hopes of selling. Lenders in this situation are very motivated to sell their properties, especially if they have a large number of them to move. These properties are considered to be huge expenses that need to be eliminated, which gives real estate investors several ways to negotiate on a relatively low purchase price.

Be sure to search foreclosure listings for bank owned properties in your area!


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