Choosing when to buy is probably the first and most important step in the foreclosure investing process. An assessment of the different points at which a property can be acquired readily identifies a pre foreclosure purchase to be most advantageous for the investor.
It is at this point that an investor can simultaneously be of service to both a struggling homeowner in need of cash, and an anxious, uneasy lender looking to maintain its liquidity, stabilize its asset portfolio, and stay out of the real estate business.
This is the time when both entities are most inclined to deal favorably and the potential foreclosure investor will find himself with sufficient time, possibly as much as ninety days in some cases, to complete necessary market analysis, property inspections and appraisals, and finalize the financing necessary to secure the purchase.
If executed in a timely manner, this property foreclosure sale will be implemented as a simple real estate transaction without any obligated obligations, multiple listing publication or damaged credit on the part of the relinquishing owner, and with consideration less less on the part of the lender, which results in a winning scenario for everyone involved.
The benefit of buying property foreclosures during pre foreclosure, when a property is in mortgage default and before it is auctioned off by the lender, affords the most flexibility and leverage for a potential buyer. Sales can take place at various other points in the foreclosure process.
In comparison, buying properties at auction presents the most precarious conditions for foreclosure investment and is riddled with pitfalls for inexperienced buyers. Another scenario, purchasing bank-owned properties, or real estate owned (REO) properties, require that real estate contracts be negotiated directly with a bank, which is not in the bank's normal course of business and consequentially creates its own challenges.
Avoiding investment in states with judicial foreclosure laws will simplify the process for the investor by avoiding involvement with the court system. Those non-judicial states also preclude homeowners in default from exercising a right of redemption, providing potential foreclosure investors a more promising opportunity to effect a binding sale.
No element of successful foreclosure investment is more challenging or more critical than determining the property's true market value. Here is where knowledgeable decisions can make the difference between realizing a profit and sustaining a loss.
Comparable listings in the area should be thought immediately , as well as a thorough property inspection and an accurate assessment of local market trends. Assembling a team of experts greatly simplifies this process, especially when time is of the essence. Real estate agents, attorneys, and investors familiar with local law, the market and the local foreclosure system are invaluable.
It is also important to seek the input of experienced home inspectors, appraisers and general contractors to make sure that you know what you are buying and are preparing to make any repairs necessary to restore the property to good condition for resale or for use as a rental .
As a clear title is an absolute necessity , a title search and title insurance are also critical elements in buying foreclosures. Costs involved in all these measures must be considered and added to all the other expenses inherent in real estate closings to create a true picture of actual market value.
Online sources abound that can provide listings of properties in default, information about the foreclosure process, financial resources helpful to the foreclosure investor, current state and local law, and the activity of local market trends. Opportunities exist in a down economy for the well-informed, careful investor to make a profit buying foreclosures if he does his homework, exercises due diligence, and follows a well-laid plan.