An investment in a distressed property can mean many things to many people. For some it can be the start of their future, for others it can be a means to build wealth and equity, still for some it can be a means to turn good profits. Distressed homes or foreclosed properties are quite popular these days due to their affordable value and their capability to provide instant equity to buyers.
The housing industry is still struggling with the huge inventory of foreclosure homes but this situation has provided a golden opportunity for financially capable individuals and businesses to boost their wealth. An investment in a distressed property has several benefits and some manageable risks. It does not require too much expertise just a good measure of research and an adequate amount of caution and self-preservation.
Foreclosure Basics
To be able to protect your investment you need to know the rules. Educate yourself on the workings of a foreclosure and the various ways by which they get offered to the market. There are several stages of the foreclosure process and buyers can opt to purchase a property in any of these stages.
During pre-foreclosure properties may be bought through short sales. This is when the home owner, with the approval of their lender, offers the home for a price that is lower than the remainder of their loan. The goal of homeowners here is to prevent the actual foreclosure and save their credit reputation. Lenders also approve of this type of sale because it will save them the cost of an actual foreclosure which can drag on for months.
Once the distressed property is officially foreclosed it can be sold through a public auction or through bank-appointed realtors. Auctions are cash sales and buyers do not have the chance to inspect the property prior to bidding. When a property does not sell at an auction it becomes a real estate owned home which can be purchased with a home loan.