subject: How To Flip Houses: Buying Properties In Different States Of Foreclosure [print this page] Buy low, sell highBuy low, sell high. This is the mantra of those who flip houses for a living. By buying homes with huge discounts, you dont have to raise a huge start-up capital just to secure investment properties that you can resell to potential buyers.
A good example of such properties is a foreclosed home. Foreclosures come with huge discounts. With these properties, you can go on a home shopping spree without having to worry about your investment capital. And most of all, you dont have to search far and wide just to find a suitable property to flip. As we all know, there has been a notable increase in the number of repossessed homes in recent years because of the housing bubble. It is fairly possible that you can find a property that you can buy for pennies on the dollar within a mile radius of your home.
Meanwhile, there are three stages in which you can flip houses in foreclosure. The first stage is during the pre-foreclosure phase. At this state, the property has already entered the foreclosure process after the homeowner received a notice of default from the lender. However, the house in question has yet to be sent to the auction as both the bank and the homeowner are considering options to prevent the property from being repossessed.
If the homeowner is unable to pay the amount he owes to the bank, you can encourage him to enter into a short sale deal with you. The bank will definitely agree with a short sale because it can prevent the financial institution from paying hefty fees. However, a disadvantage of flipping homes during the pre-foreclosure stage is that prices are usually higher as compared to other states of foreclosure.
The next stage is during the foreclosure phase. At this state, the bank has already repossessed the property and is selling it at an auction. Buying flippers at real estate auctions are generally unadvisable because a real estate investor might be forced to participate in bidding wars and spend more money just to secure a profitable property.
The last phase is when the bank has taken back the property for its failure to get bids during the auction. During this particular stage of foreclosure, the property is now called a bank owned or real estate owned (REO) home. An advantage of buying an REO is that it comes with a clear title. However, REOs are typically sold as-is, meaning the bank will not attempt to pay for the repairs on the house.
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