When you mention to someone that you’re interested in pre foreclosure home investing, you’re likely to bring well- (and maybe not-so-well) meaning advice bearers out of the woodwork. Save yourself some aggravation by knowing the truth behind these common pieces of pre foreclosure investing “advice” you’re likely to get:
You’d better have a lawyer at the pre foreclosure sale. A lawyer won’t be able to do much at the pre foreclosure sale, since the terms will have already been set. The best protection you can have at this point is your title insurance policy if you end up purchasing the foreclosure home.
If you buy a pre foreclosure home, the owner can force you to sell it back to him within one year. This concept, called the “right of redemption,” exists if the pre foreclosure home goes to the sheriff’s sale, but it does not exist while the house is a pre foreclosure home.
When you buy a pre foreclosure home, you’ll get stuck with huge closing costs. The closing costs you will have when you buy a pre foreclosure home are the same costs that you would have with most ordinary real estate transactions.
Most pre foreclosure homes are money pits. Though it’s true that some pre foreclosure homes will need extensive (and expensive) repairs, many, many owners who find themselves in pre foreclosure have beautiful homes. What’s more, because of the situation they’re in, they’re often willing to sell to you at a below-market price, simply to get out from under their burden. But you shouldn’t completely overlook those fixer-uppers, either. Sometimes, you can get them for such a bargain that they’ll turn you a handsome profit, even after the expense of repairs.
Pre foreclosure home investing does require some caution, as well as some common sense. But don’t let naysayers talk you out of investing in a market that can yield huge profits.