The mortgage foreclosure process creates
three sets of real estate investing opportunities: the
"Default/Pre-Foreclosure" phase, the "Auction/Sale" phase and the "REO"
phase. Be sure you know the risks and the rewards of each opportunity.
Buying Pre-Foreclosures
Buying pre-foreclosures involves working
directly with the homeowner and sometimes the lender. Your goal is to create
a Win-Win scenario. One win is for the homeowners (they make a sale) and one
win is for yourself (you buy the property at a substantial discount).
To accomplish a successful purchase, most
experts recommend the following: (1) locate loans in default, (2) evaluate
and narrow selections to pursue, (3) inspect the property, (4) evaluate the
property owner's needs, (5) determine the market value of the property,
fix-up costs, potential sales price and profits, (7) arrange default work
out by negotiating with the owner and the lender, (8) close on the property,
repair and resell it quickly.
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 At The Auction
Buying on the court house steps at the auction
can be the most rewarding way to buy properties and the most dangerous at
the same time. The property is publicly auctioned off to the highest bidder,
and the process moves very quickly. When bidding at the auction, you compete
against the lender and other investors.
Auction buyers (1) research properties prior
to the sale date, (2) pursue realistic opportunities, (3) calculate values
and potential profits, (4) determine bid price and (6) follow the property
to the auction and participate.
Pros: Very good to excellent discounts.
Investors can achieve 35% to 45% savings off market values and earn an
excellent return on investment. This is the only investing method where you
can really hit the jackpot.
Cons: Auctions are frequently
postponed, wasting your time and effort. It is rarely possible to inspect
the property. To be safe, you should have a title search performed, which
can be costly. Unusually large cash outlays deter most investors (note that
this can also be seen as a benefit). Certified checks for 10% of the
purchase amount may be required with the balance due in weeks, days or even
hours. Improper research can lead to devastating results.
Buying REOs
Perhaps the easiest way to buy foreclosed
property is buying REOs ("real estate owned"). An REO occurs when the lender
takes back the property to gain possession and cut its losses. The lender,
however, does not want the property because it is not in the real estate
business and is therefore usually motivated to move the property quickly.
Pros: The lender is almost always the
senior lien holder, thereby wiping out all other liens at the auction. This
means an REO will always have clear title, which saves a lot of time,
expense and worries when buying foreclosures. Most likely, the lender will
also have paid any property taxes in arrears. The lender may either repair
the property to acceptable standards or allow a discount to the buyer to
accomplish the repairs.
Cons: Rewards follow risk. This is a
low risk investing method and the rewards can be on the low side as well.
Average savings may range from only 5% to 15% off market value, although
discounts of 25% or more are possible if you know how.
Investing in foreclosures can provide
excellent profits. Each of the three foreclosure opportunities presents
both rewards and certain risks. Be sure to do your homework before you
buy.
Distress Sales resulting from bank
foreclosures often represent a great way to get a fantastic deal on a
home. It's not easy for the average homeowner to find these deals,
because you have to keep scouring the paper to see when one comes up.
If you're the type of person who
recognizes what a great deal some of these properties could represent,
you will be interested to know about a new free computerized service
which automatically searches out and downloads a current list of all
such properties day in and day out. When you receive this free, no
obligation service, you're automatically plugged in to the most current
list of Foreclosure Properties on the market, in the price range and
area that interests you. This FREE service every week will save
you a lot of research and running around.
Here's how it works. Every week, you will
receive a FREE computerized report listing the current
Foreclosure properties in your desired price range and location. There
is no cost for this information, and absolutely no obligation. This
insider information, sent to you in an incredibly simple and efficient
format, will give you a huge advantage over other buyers in the
marketplace.
You can request this free service by
simply filling out the information on the Palm Beach County Foreclosure
Weekly form available
by clicking here and including the specific price range and area you
would like the "Foreclosure Weekly Report" on. When you have
completed the form
just click the "Submit" button at the bottom of the page.
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