The process of mortgage foreclosure presents three good opportunities for investment - Default/Pre-Foreclosure, Auction/Sale and the REO. Buying Default/Pre-Foreclosures The process of buying pre-foreclosures involves a direct interaction with homeowner and the lender. The objective here is to make the homeowner win by selling and win yourself by buying the property at a discount. The whole deal as outlined above could be a great investing opportunity, but, timing and procedure is everything. You could discount the market value on closure anywhere up to 35% on an average. If you act in time and structure the deal properly, you may even get away with a small down payment. The ale agreements can also be tailored to your advantage by keeping them unique and flexible. The other side could be that the owner is not available to deal. A lot of competition is out there looking to cut you down. Research in the court could be confusing and take up valuable time. Negotiations with lien holders are not ruled out. Well, you are out there to make a nice and tidy profit and these small encumbrances would not really hurt. Auction Buying Buying foreclosed real estate in a court auction could be the most rewarding and the most risky at the same time. The bidding normally involves biding against the lender and other competition. The process of auction is a very fast and normally requires payment in cash within 24-48 hours. You could get good to excellent discounts and get a wonderful return on investment in the end. By far the best investment, if you do not consider the time wasted on postponed auctions, expensive title searches and risks of improper research. Buying REO's The easiest way to buying foreclosed real estate is buying REO's (real estate owned). An REO is a category of property where the lender repossesses the property to cut losses and wants to dispose it off for cash, since the lender is not in the real estate business. The lender is the only lien holder, 90% of the time which means that the REO will have a clear title (saves a lot of cost and heart burn). The property can be assumed free of all liabilities and repairs since the lender has the major interest. The property thus, may be ready for resale once it is purchased although the savings may be small (usually 10-15%). Buying foreclosed real estate can be a profitable business if you do your homework before you invest and have the right backing of financiers to finance your acquisitions and a good marketing network to attract buyers. |
