How To Buy Foreclosure Properties
Real estate foreclosures aren't a happy subject for homeowners who've been unable to keep up their mortgage payments and consequently have lost their home to the lender. Yet some investors do quite well buying these homes either from distressed homeowners in the pre-foreclosure stage or from lenders after the foreclosure has been effected. Both pre-foreclosures and foreclosures can be good investments if the home can be purchased at an attractive discount to market value.
Success in these markets isn't quick or easy. Rather, it takes time to research the homes that may be available and locate and contact the homeowners or attend the public sales and auctions at which the homes are sold.
Research is crucial to avoid over-paying, especially since these homes may be located in markets where home prices have softened. Purchase prices should be based on recent sales of comparable homes and home price trends. Timely newspaper articles about housing markets also can be used to set target prices and present a rationale for the price to the homeowner. Investors should be wary of outdated information since market conditions can change quickly.
Subscription-based services are a popular resource for information about foreclosure notices and sales of foreclosed homes. These services aren't exclusive, so many prospective investors may receive the same information. The first investor on the spot often has the best chance to purchase the property.
Some homeowners forestall foreclosure by negotiating a forbearance or loan modification agreement with the lender. But smart investors hang on to information about such homes because while some homeowners are able to rectify their situation, others aren't. In the later case, those properties may reappear as preforeclosure or foreclosure opportunities some months or even a few years later.
No real estate investment is free of risk, and indeed, foreclosures are subject to some special hazards.
Foreclosure homes frequently are in poor physical condition since the homeowners typically lack funds for maintenance and repairs and may have a diminished pride of ownership. These homes also may have been stripped of furnishings, fixtures and appliances that could be sold for cash.
Many states offer a right of redemption, which allows the homeowner to repurchase his or her own home even after the foreclosure is completed. The time period for this right may be a few months or as long as two years in some states. Buybacks are rare, but not impossible.
Finally, the property may be encumbered by liens that could survive the foreclosure process. Two examples are unpaid property taxes and liens placed on the property by the Internal Revenue Service to collect unpaid federal income taxes. An investor who purchased the property could become responsible for those sums.
Copyright 2007. Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.
COMING NEXT ISSUE:
How to overcome investment jitters.
The Investor e-Newsletter is provided free by HomeVestors of America, Inc.
Listen to the HomeVestors Real Estate Investors Hour each Sunday at 8 a.m. on WBAP Radio, click here to listen.
HomeVestors of America
HomeVestors®, the "We Buy Ugly Houses®" company, is now in 35 states and has more than 270 franchise offices. Savvy investors know that this is the best time to buy property, just ask our franchisees. Call us for more information at 1-866-249-6932.
If you have a question, comment, or an idea for our newsletter, please click here.
