Buy Foreclosures at the Pre Foreclosure Stage At the pre foreclosure stage, the homeowner has defaulted on his mortgage loan. The bank has begun the foreclosure process, which will end with the foreclosure auction. In pre foreclosure, the owner still has a chance to preserve his credit by selling the house and thus getting rid of his mortgage debt. He is often anxious to “unload” it, to end his financial troubles. If you want to create a win-win situation for you (you get a property at a deep discount) and for the seller (he sells his property), buy foreclosures while they’re in the pre foreclosure stage.
Buy Foreclosures at Auction A public auction can be more nerve-wracking than working directly with the seller to buy a pre foreclosure property. First, you’ll be competing with the lender, as well as with many others who also want to buy foreclosures. The process moves quickly, and the property is auctioned off to the highest bidder. Though you may need to have a large amount of cash up front, and sometimes the remainder within weeks or months, you can often get great property at 35-40% off market values.
Buy Foreclosures in the REO (Real Estate Owned) Phase When the lender takes back a foreclosure property to cut its losses, the property is called “REO.” An REO property can often be very easy to buy, because lenders generally don’t want to be in the business of owning property, and want to move the property quickly. If you buy foreclosures in the REO phase, you may not get discounts as deep as with auction sales or pre foreclosures, but, on the other hand, your risks are generally lower.
Each stage of the foreclosure process offers a distinct way to buy foreclosures. If you do your homework, you can buy foreclosures at minimal risk and maximum profit.
]]>Buying foreclosure properties can allow you to invest in other properties with the money you save (foreclosure or not). Or, you can use the money to convert the foreclosure property into a rental home, or flip it and make still more profit.
You can buy a foreclosure property quickly (provided the owner is willing, and he usually is) and without undergoing financial scrutiny. Because the foreclosure process is a fast process (usually about three weeks, from beginning to end), and because you’re likely to have a cooperative seller under the circumstances, you don’t have to go through the regular financing channels. You can deal negotiate with the owner to take over his/her loan, offer cash (if you have it), or use other creative financing that doesn’t involve a long, drawn-out financial process.
Foreclosure investing has always been a great investing opportunity. In today’s economy, it may be just a little easier to take advantage of this opportunity.
]]>Build your army of pre foreclosure headhunters. Make it widely known to everyone you come into contact with that you buy pre foreclosure homes (you’ll probably have to educate them a little about what to look for). Let them know you’ll offer them a bounty (say, $500) if you end up buying a property they tell you about. Tell your mail carrier, your grocer, your neighbors, your hair stylist, your kids’ parents…and give each of them a stack of your business cards.
Post flyers wherever you can. Post your pre foreclosure bounty offer at your church or synagogue, your health club, your coffee stop, your gas station, the laundromat – anywhere there’s a bulletin board.
Contact utility companies. Sometimes the gas or electric company can be a good source of leads on vacant or troubled property (which may be in pre foreclosure). Make sure they know about you, and that they have your business cards.
Place an ad at a widespread online service such as Craigslist. Millions of people frequent these classified ad services every day, including people whose property is in pre foreclosure, as well as people who may know of a property in pre foreclosure
Don’t limit yourself to single family homes. Other types of properties go into pre foreclosure, too. Mobile homes, duplexes, churches, farms, even raw land can all have owners with financial difficulties that have forced them into pre foreclosure.
These are only a few of the more creative ways to find potential pre foreclosure properties that can result in huge real estate profits for you.
]]>In a falling market, flipping homes can still be profitable, because your holding period is normally too short for the value of the property to fall lower than the discount price at which you got it. And since you will have raised the value of the property by rehabbing it, your likelihood of making a profit is still high.
Additionally, in the current market, you’ll find many opportunities for flipping homes among foreclosure properties whose owners want to unload their houses quickly in order to get rid of their financial burden and salvage their credit.
In fact, many people who make money flipping homes only deal with foreclosure properties, which can often be purchased at well below the market values. Though foreclosure properties may sometimes require more rehabbing than do other undervalued homes, they can still provide you with great opportunities to profit at flipping homes. Flipping homes can be highly profitable in any market, but there are definite advantages to flipping homes in a soft market.
]]>How much money will I need to spend in order to make the house saleable?It’s not a foreclosure investing deal unless you can make a profit. Many would-be investors underestimate the cost of necessary repairs. If at all possible, get an inspection, or at least walk through the house with someone who is knowledgeable about what needs to be done to make the house livable and safe. If you’ll be doing the work yourself, get estimates for material costs. If you’re hiring someone else, get estimates for their total costs to you.
How much time will be required to make the house livable?Be realistic. If you’re doing the repairs yourself, do you have the knowledge, skill, and time to make this foreclosure investing venture profitable? Many a would-be foreclosure investing tycoon has bought a “fixer-upper,” with great do-it-yourself plans to fix it up and sell it at a profit. In many cases, they’ve found themselves years later, still working on a seemingly endless bunch of repairs. And remember, a house that was obviously fixed up by a “do-it-yourselfer” (e.g., with an amateur drywall job) is not likely to be attractive to many buyers.
Is the house in a desirable neighborhood?This is not to say that your foreclosure investing has to take place in only the “best” neighborhoods, but you should keep in mind the level of appeal the property will have to potential buyers. Will a variety of people find the area safe and pleasant? Surroundings are part of the package you’re selling..
If I ask a realistic selling price for this property, will I still make a profit?
With rare exceptions, you can only sell a property at a price the market will support. In foreclosure investing, even if you’ve spent a pile of money on repairs and upgrades, you can’t expect to sell a property for $250,000 when the highest-priced homes in the area are going for $150,000. This is key to foreclosure investing success.
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When you buy a pre foreclosure property, you’ll get stuck with huge closing costs. The only closing costs you will have when you buy a pre foreclosure house are the cost of the title insurance policy and the cost of recording the deed.
Most pre foreclosure properties 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 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.
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