Foreclosure Real Estate Investment Strategies

 

If you are willing to invest in foreclosure real estate, it can be a lucrative niche. There are many types of foreclosed properties, including residential and vacant land as well as commercial real estate.

Investors must be financially ready to invest in property renovations or repairs when buying foreclosed real estate. Foreclosed properties can be priced below market value but homes that require extensive repairs Sedona Az Realtor can quickly drain home equity.

To determine the true cost to buy foreclosure properties, investors must do their homework and review comparable sales reports.

There are many options available to locate foreclosed properties at a discounted price. Public foreclosure auctions are the most popular option. All properties sold through auction are sold "as is". After their bid is accepted, buyers must be ready to pay in full within 24 hours. After real estate is transferred, the property owner must remove tax and creditor liens and make repairs.

You can also search for foreclosure short sales homes. These properties are currently in foreclosure and negotiations with the lender's loss mitigation department take place to purchase them.

Lenders will accept a shorter sale if the loan amount is less than the total amount. The bank sells properties directly or through a realtor. The process of short selling can be complicated and take up to four months to complete. Before submitting an offer, buyers must have prequalified financing. Banks rarely accept lower offers than the asking price, unless there are major defects found during property inspections.

Investors can get a great deal on short-sale houses, but this may not be the best option if they are interested in flipping homes or intend to rent the property out. Homes can be purchased at a 10- to 20% discount from their appraised value by buyers who are willing to wait.

Private investors that specialize in wholesaling are one way to get the best deal on foreclosure properties. An investment group or investor can purchase whole bank portfolios that include dozens of bank-owned foreclosure properties.

These properties, also known as real property owned (REO), are houses that were not sold at auction. REO properties have the advantage of a clean title. Banks reclaim foreclosure real estate by removing tax and credit liens attached to it. They also initiate eviction proceedings if the homeowners refuse to vacate the property.

Bulk buyers of homes can get wholesale prices and pass the savings on to their customers. REO homes are often purchased at 20% to 30% below the market value, providing investors with instant equity.

Real estate investors need to be educated on all aspects of purchasing foreclosure properties. Many investors fall for the low cost of foreclosures but don't realize the associated costs.

Nearly all bank-owned real estate, foreclosures and short sales require some degree of repair. Before making an offer to purchase a property, investors should take the time to determine its true value. Investors could end up with a money pit that could be difficult to recover from.