Foreclosures: Is This The Right Investment For you?

Real Estate

Foreclosures are at record levels in this country and there are deals to be had as banks try to unload houses back into the market and recoup some of the money that the previous owner failed to pay back. There are messy details, issues and challenges with the former owners and the problems associated with buying a house that hasn’t had the repairs and maintenance kept up over the past few months/years. Bank Foreclosed Homes can be a good deal for someone prepared for the dark side of foreclosure investment, but many people are still caught unawares by the lesser known pitfalls.

You can buy foreclosures three ways: directly from homeowner before the bank forecloses, purchase a real estate owned property( REO) or bid at a county foreclosure auction. An REO is a property that lenders have bought back at an auction, and offers the easiest method for novices to get into the foreclosure ring. You will not deal with an owner who is facing foreclosure. An REO is likely to be sold “as is,” but you will have the right to an inspection, a title search and contingencies, and you can finance the purchase with a conventional loan, but you aren’t likely to get as deep a discount as an investor in other types of foreclosures.

Usually all you will be able to do is just look in a window or two before you buy when you buy a home “as is” at auction. More often than not these types of foreclosures can have numerous problems. Some owners vandalize properties, figuring that they are already in foreclosure, they might as well take anything valuable. Keep in mind that foreclosed homes may have water or mold damage because of a lack of maintenance over the years. The house may have a history of legal problems or, in some states, a “redemption period,” a period of time that gives the former owner time to get the houseback.

If you are disciplined and follow the correct steps, you could find yourself with a tidy little profit from a foray into foreclosures