subject: Understanding Real Estate Investing Principles [print this page] Many are looking to real estate investing as a part or full time business. Many people think this is a good time to get into the game because there are many foreclosures on the market. Foreclosed homes are those that are owned by the bank or the lender.
Many people are losing their homes because they cannot afford to pay their house payments. They may have lost their job or perhaps they took out a variable interest loan and the interest rate has gone up and they can pay the higher loan payment. Banks repossess the house and then sell the foreclosed homes to people who are looking for a house to move into, or to investors who want to buy the property and resell it for a profit.
Most foreclosures are sold to investors because the property is usually in need of repair. The foreclosures are in disrepair because the people who were evicted from the home realized that they would have to move out so they allow the house to in essence, fall apart. Some even damage the house on purpose.
Most people looking for a house to move into, do not want to have to spend money and time repairing a damaged home. But the investor will buy the house, rehab it, and either sell it for a profit, or rent it out for positive cash flow. Banks do not sell REO properties to investors or people looking for a house to move into. They are required by law to assign their REO property, or real estate owned property, to a property agent.
They work with only a handful of agents who understand the REO market and sales procedure. The successful investor finds out the agents who work with REO properties and create business relationships with them so that they can find out of any new properties before they are listed on the MLS. The MLS is the multiple listing service, and is where all houses owned by the banks are listed for sale.
The MLS is the multiple listing service and once a house is placed on the MLS, it will draw a lot of attention and many bids. But an agent does not have to immediately place a home that he has been assigned by the bank, on the MLS. Before he places it on the MLS, he can call the investor he has a business relationship with and offer the investor the chance to bid on the house before anyone else is aware of the property
This is legal under the rules of the real estate state board, so there is no wrong doing. The investor who has many friends in the real estate business will have more opportunity to make bids on houses not yet on the MLS.
