Buying distressed homes either to live in, rent out or sell is the best investment you can make. And there are many ways of purchasing distressed properties. The method you will choose will largely depend on your budget.
Pre-Foreclosure Buying:
Pre-foreclosure is the stage in which the properties are already at default but not yet in foreclosure. This is the stage in which the distressed homeowners have received notices of defaults and a demand from mortgage lenders to make their accounts current or face foreclosures.
Many distressed homeowners who know that they could not save their properties from foreclosures prefer to sell rather than face the trouble of going into foreclosure. Also, selling would give them a chance to pay their debts and save their credit rating. Because they are in a hurry to sell their properties, they would most likely accept any reasonable offer to buy.
That is why it pays to arrange your finances first before buying distressed homes. Distressed homeowners will most likely negotiate with buyers who have pre-approved loans. But be warned that the desperation of homeowners to sell will also not work on your favor. They may withhold any information that may deter you from buying their properties such as hidden liens and major structural damage. Researching the financial history of the property and hiring a professional home inspector may overcome these problems.
Auction Buying:
As soon as properties have been foreclosed, they will be sold in auctions. Interested buyers will be required to bid for the properties that interest them. Rules on foreclosure auctions vary by state so it is a must that you know the laws on the process before you attend a foreclosure sale. Some states require that those who won in the bidding should pay cash for the property.
Real Estate Owned Buying:
Properties that have not been sold at auctions will be returned to their lenders. Usually, banks sell these properties for half their market value in order to dispose them immediately. It would not be good for the image of banks to have a large inventory of foreclosure properties, thus the need to sell them immediately. Furthermore, selling these properties is the only way to recover their losses.
Whatever method you choose for buying distressed homes, it pays to arrange your finances and stick to your budget