Steps To Successful Foreclosure Investing
Choosing when to buy is probably the first and most important
step in the foreclosure investing process. An assessment of
the different points at which a property can be acquired
readily identifies a preforeclosure purchase to be most
advantageous for the investor. It is at this point that an
investor can simultaneously be of service to both a struggling
homeowner in need of cash, and an anxious, uneasy lender
looking to maintain its liquidity, stabilize its asset
portfolio, and stay out of the real estate business. This is
the time when both entities are most inclined to deal
favorably and the potential foreclosure investor will find
himself with sufficient time, perhaps as much as ninety days
in some cases, to complete necessary market analyses, property
inspections and appraisals, and finalize the financing
necessary to secure the purchase. If executed in a timely
manner, this property foreclosure sale will be implemented as
a simple real estate transaction without any owed commissions,
multiple listing publication, or damaged credit on the part of
the relinquishing owner, and with considerably less exposure
on the part of the lender, which constitutes a winning
scenario for everyone involved.
The benefit of buying property foreclosures during
preforeclosure, when a property is in mortgage default and
before it is auctioned off by the lender, affords the most
flexibility and leverage for a potential buyer. Sales can take
place at various other points in the foreclosure process. In
comparison, buying properties at auction presents the most
precarious conditions for foreclosure investment and is
riddled with pitfalls for inexperienced buyers. Another
scenario, purchasing bank-owned properties, or real estate
owned (REO) properties, require that real estate contracts be
negotiated directly with a bank, which is not in the banks
normal course of business and consequently creates its own
challenges.
Avoiding investment in states with judicial foreclosure laws
will simplify the process for the investor by avoiding
involvement with the court system. Those non-judicial states
also preclude homeowners in default from exercising a right of
redemption, providing potential foreclosure investors a more
promising opportunity to effect a binding sale.
No element of successful foreclosure investment is more
challenging or more critical than determining the propertys
true market value. Here is where knowledgeable decisions can
make the difference between realizing a profit and sustaining
a loss. Comparable listings in the area should be sought
immediately, as well as a thorough property inspection and an
accurate assessment of local market trends. Assembling a team
of experts greatly simplifies this process, especially when
time is of the essence. Real estate agents, attorneys, and
investors familiar with local law, the market and the local
foreclosure system are invaluable. It is also important to
seek the input of experienced home inspectors, appraisers and
general contractors to make sure that you know what you are
buying and are prepared to make any repairs necessary to
restore the property to good condition for resale or for use
as a rental. As a clear title is an absolute necessity, a
title search and title insurance are also critical elements in
buying foreclosures. Costs involved in all these measures must
be considered and added to all the other expenses inherent in
real estate closings to create a true picture of actual market
value.
Online sources abound that can provide listings of properties
in default, information about the foreclosure process,
financial resources helpful to the foreclosure investor,
current state and local law, and the activity of local market
trends. Opportunities exist in a down economy for the well-
informed, careful investor to make a profit buying
foreclosures if he does his homework, exercises due diligence,
and follows a well-laid plan.
by: Paul Woods
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