Real Estate Foreclosure Investing and How To Get Started

As many people succumb to the pressures of the recent economic downturn, the rate of homes in foreclosure is increasing dramatically. While this is terrible news for the person going through foreclosure proceedings, it can mean finding some excellent bargain investment properties for any wise investors watching the markets.

What Exactly are Foreclosures?

Banks begin foreclosure proceedings when a home owner falls behind on mortgage payments. When those payments are so far in arrears, the bank begins to take steps to recover the money is it owed by those home owners. If there is no possible way for the home owner to raise enough cash to cover the outstanding debts, then the bank has no other choice but to sell the house used as collateral security.

Why Buy Foreclosed Properties?

When a lender begins foreclosure proceedings, they aim at recovering the amount of money that is outstanding against the property. This can often mean the property is being sold for a much lower price than the real value of the property. Wise investors could find themselves purchasing properties at only a fraction of their true value with just a little research. Buying an investment property below true market price can mean an instant increase in the amount of available equity you have.

There are three options if you’re considering buying foreclosed property. Each opportunity comes with distinct advantages and disadvantages.

Pre-Foreclosure

The first option is to try and buy property during pre-foreclosure. Pre-foreclosed properties are homes that are still owned by the home owner. This means the bank hasn’t taken possession as yet. The current owners are very motivated to sell the house to get themselves out of trouble, so you could easily pick up a great bargain.

Purchase Through Court Auctions

The second option is buying during the court auctions after the property has been foreclosed upon. The disadvantage to an investor in this situation is that if there are several bidders at the auction, this could drive the price higher than you were willing to pay.

Purchase Directly From Lenders

The third option is buying after the lender has acquired the property and taken full ownership. Banks aren’t in business to buy property. They make their profits by charging interest on money they lend out to people, so its in their interests to sell any property they’ve acquired. In many cases, they’ll happily negotiate with you on the purchase price of the property. This can be one of the simplest ways to purchase real estate at a reasonable price.

Whichever option you choose, it’s always vital that you inspect the property thoroughly and investigate the true extent of any debts outstanding against the home.

Once you’re sure the numbers stack up the right way, you could easily be purchasing an investment property that is valued so much higher than the price you paid for it. Wise investors also understand that by keeping purchase costs low, they also have the opportunity to build an ongoing source of income as the rent can often exceed the costs associated with owning and maintaining the investment property.

Always be sure to spend some time researching into any potential foreclosed home you’re considering buying and you’ll soon find that there are opportunities to make great profits very quickly.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com