As a direct result of the sub-prime lending spree that has gripped the nation in the past years we are now seeing a great number of homes being foreclosed on and sold for amazingly low prices. This gives investors interested in investing in a property a great opportunity to get themselves a great investment for less than they might expect. Foreclosures are not too hard to find either. There is also many avenues to consider as well. Just a few will be listed here. Many more creative opportunities are available.
Buying Pre-Foreclosures
What is pre-foreclosures?
Pre-Foreclosure: Buying a property in pre-foreclosure is when the buyer offers to buy property from the borrower/owner. The borrower/owner can choose to walk away in order to avoid any bad mark on their credit history. This gives time to the buyer to research the title and condition of the property and can obtain discounts between 20-40 percent below market value.
Pros: This is a great investing opportunity if done correctly. Discounts off market value can range from 20% to 35% on average. A low cash down payment is possible if structured properly. You have ample time to research properties. Unique and flexible sales agreements are possible.
Cons: It is sometimes difficult to contact the property owner. You will usually have a lot of competition. The court house research can be cumbersome. You may need to negotiate with the lien holders.
Buying reos
BANK-OWNED OR REO (real estate owned) - In this case, the bank has gone through the complete foreclosure process and actually taken title to the property and evicted the previous owner in order to sell the property.
Pros:
Buying reos let an investor have opportunity to gain property well below market value sometimes as much of 50 cents on the dollar. With this huge margin investor position themselves to make some increasable profits.
Cons:
Remember, in this scenario, the bank has forcefully taken ownership and possession of the home before attempting to sell it. This means that the defaulting party was probably very upset prior to leaving the home. It is becoming more common to hear stories of how angry homeowners damaged/destroyed property in the home, removed appliances, plumbing fixtures, cabinets, light fixtures/ceiling fans and/or other home fixtures. I have even seen property with significant water damage, drywall damage and heard of stories of people throwing cement into the drains to cause future owners headaches. It is VERY IMPORTANT TO HAVE THROUGH INSPECTIONS OF THESE TYPES OF HOMES
Great advice to consider:
Ok, so now we know why it’s a great time to invest in foreclosures. There are a multitude of ways, and they really differ from state to state, depending upon your state’s foreclosure laws. I strongly suggest step one in the foreclosure process for you is to contact an attorney in your area and inquire into the foreclosure laws and requirements in your state. You can also easily Google your state’s foreclosure laws, and if you’re extra savvy, look up your State’s statutes , then just search within the statutes for “foreclosure”. This is important because each state has a different way of treating the foreclosure process, and more importantly, the rights of the owner whose home is going into foreclosure. Once you’ve learned your state’s foreclosure laws, you can move ahead with the process. I’m suggesting something entirely different, however, and it’s a growing aspect of investing in real estate foreclosures. It’s called investing in “pre-foreclosures”. This is better for many reasons. An important one is that, in some cases, when someone is foreclosed upon, they trash their place. They’re emotional about it. They’re pissed off at being kicked out. You name it, they feel it. So they take it out on the house. Additionally, before the foreclosure sale, you are not granted access into the home, so you have no idea what they did to it. You might buy what you think is a great property, only to find out that they plugged the toilet on the top floor then flushed it and let it flood the entire house. Or ripped out all of the copper plumbing and sold it. Or tore out the electrical. If you think about it, there’s an amazing amount of vandalizing someone could do to a home if unchecked. It’s sad, really.
Important reminder
I know personal there is tons of information on the market today. If I could give a word of cause learn your field. Never jump right in without the proper knowledge it could be a distaste. I found a ounce of prevention is better then a pure a cure. Take action but do your homework.
