The Risks And Rewards Of Investing In Foreclosures By John Nazareno There are many different things to invest in these days. One investment route which individuals take is with regard to foreclosures. foreclosures occur when the current homeowner of a property fails to pay their monthly mortgage and the property is repossessed by the lender. There are various risks and rewards which go along with investments of this type and some of these will be discussed below.
Advantages and Disadvantages to Buying Pre-Foreclosure Properties
One type of property sale which relates to foreclosures is the pre-foreclosure sale. A pre-foreclosure sale occurs when the lender allows the homeowner with past due mortgage payments to sell the home on their own and pay back the lender what they can from the sale of the home. The lender often agrees to this so that they do not have to get involved with possessing then reselling the home and the homeowner likes this option because it prevents foreclosure. The investor also benefits from this type of sale as well.
Some advantages to purchasing an investment property via pre-foreclosure sale include discounted price, speedy purchase and wonderful profit opportunities. As for the disadvantages, the investor who buys property by way of a pre-foreclosure sale may find that the homeowner is hard to contact and/or unwilling to sell, the research is cumbersome and there are other potential buyers who wish to purchase the property.
For those who wish to purchase property via a pre-foreclosure sale, they should do their independent research, approach the homeowner in a courteous manner and ensure that they make an offer that will not cause them to lose money in the end. By doing so, the investor may find that buying a house by pre-foreclosure sale will work to their advantage.
Advantages and Disadvantages to Buying at a Foreclosure Auction
Another way to purchase foreclosure property is through a foreclosure auction. Auctions of this type are usually held at the local courthouse of the county where the property is located within. This is a common way for foreclosed properties to be sold and this too has its pros and cons.
The main advantage to purchasing property at a foreclosure auction is the reasonable price for which one can bid on a property. Although there will be other bidders, the resulting price is usually one that is quite attractive. Another advantage relates to the profit which
will see when they resell the home. Since the home was won at a reasonable
amount, when the highest bidder goes to resell the property they will
most likely see a good profit margin from that sale.
to the disadvantages, purchasing a home at a foreclosure auction has
a few which are tied in with it. The first disadvantage to buying a
home this way relates to the inability to inspect the property. As
auction homes are usually sold as is, the bidder who wishes to adequately
inspect the home beforehand will be unlikely to do so. Another disadvantage
to purchasing a home via auction is that the purchase price and deposit
is due via cash or cashier’s check in many instances which may be difficult
for many investors to obtain on short notice.
Disadvantages to Buying Real Estate Owned (REO) Properties
last type of property purchase which relates to foreclosures is real estate owned properties, or REOs. An REO is when the property
returns to the exclusive hands of the lender and then needs to be sold from that
point. The lender is looking to sell their newly acquired property as soon as
possible since they do not want to be in charge of the property and its necessary
maintenance. The lender will then look for potential buyers of the property.
advantages to buying an REO are that they usually have good title, property taxes
will be up to date and repairs may have been made to the property by the lender
to ready it for sale. As for the disadvantages, those who purchase REOs may find
that the savings which they see by purchasing an REO are not as great as they
could be and therefore, the profits may not be as great as well.
purchasing property in any of the previously mentioned ways there are a few things
to keep in mind when doing so. It is extremely important to do independent research
with regard to the properties and purchase methods, ensure necessary funds for
purchase and inspect the property whenever possible. This will help to ensure
that the buying process goes as smoothly as possible.
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