How to Be a Foreclosure Investor
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By :
Darius H Clements
Submitted
2012-02-06 09:35:13 |
Learn How to Be a Foreclosure Investor In This Current Economic Climate.
With all of the foreclosures available in this country, you may be wondering if you should start investing in foreclosures.
If you have cash reserves and good credit, investing in foreclosures is a good idea. There are fewer investors today able to buy foreclosures than there were just a few years ago with far more foreclosures available.
The market is going to recover soon. You will need to hold onto your investments for a short period of time before you make your money back many times over. After reading this article you will have a head start as a foreclosure investor.
There are three stages in which to buy a foreclosure involving the owner, the mortgage company, and the legal system. There is also an independent process that many investors choose. Your first step is to decide how you want to buy a foreclosure.
Buying at Pre-foreclosure
The pre-foreclosure process involves buying from the owner who still has possession of the property. You will use a short sale in order to purchase the property at discount. Pre-foreclosure can be a win-win-win situation with the homeowner, the mortgage company and the investor winning in the process.
The homeowner sells the home and avoids a foreclosure on his credit record. The mortgage company loses money because of the discount on the remaining balance, yet overall they win when they save the high cost of foreclosure and never have to add the property to their inventory.
The investor wins because generally pre-foreclosure properties are in the best condition and he has purchased a valuable piece of property for under market value.
Be Careful
The problem with this method of investment is its high failure rate. Nearly 85 percent of short sales fail completion because of the many things that can happen. The homeowner may find financing and back out of the deal.
The mortgage company may decide the discount needed for the short sale is more than they want to give. The investor may not find financing for the short sale.
Buying at Auction
When it becomes obvious that the mortgage company and the homeowner cannot come to a settlement for the money owed, the mortgage company will try to sell the property at an auction, also called a sheriff’s sale.
The property is presented for sale through a legal process and the highest bidder takes possession of the property. There is little competition at sheriff’s sales because this is not the best way to buy foreclosures.
The mortgage company bids $1 over the amount owed on the home to retain possession.
Buying at auction can be lucrative for an investor if he can buy at a good price. S/he will need a substantial amount of down payment on the day of the auction (up to 10% of the bid). The investor will then need the financing to pay for the property within 30 days.
Buying from the Bank
When the bank retains the property after the auction the property becomes a part of its inventory. The bank is not in the real estate investment business except to loan money. They are anxious to unload this unwanted inventory especially in these times of high foreclosure.
Banks work with real estate agents who specialize in foreclosures to move inventory. If you decide to invest in foreclosure dealing directly with the bank, find a foreclosure real estate agent who can inform you of the best properties.
Buying from Listings
If you wish to be an independent investor in foreclosures, you will need current foreclosure listings of good properties.
In Conclusion
While it is possible to research your own listings, this is a time-consuming process. It is less costly to subscribe to a foreclosure listing for around $40 per month and concentrate on contacting interested parties and making deals.
How to Be a Foreclosure Investor By Darius H Clements
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