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subject: Steps To Successful Foreclosure Investing [print this page]

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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