A foreclosed property is a piece of real estate sold by a mortgage lender or bank in order to pay off a defaulted or unpaid mortgage loan. Foreclosures end with a public auction in which mortgage lender or bank sells the property, which can be bought by a private citizen as well as the bank itself.
Real estate owned (REO) properties are properties that have been foreclosed on by the bank, which are in possession of the bank in an effort to recoup the original mortgage loan. When a property is auctioned at a sheriff’s sale and does not sell, it becomes an REO property.
Pre-foreclosure, the period between default and foreclosure, means the homeowner is delinquent on their mortgage loan payments and is in danger of losing their home due to foreclosure. Pre-foreclosure properties are often listed at 40 percent less than the property’s market value since the homeowner is anxious to sell the property to clear their debts. Pre-foreclosure properties are sold “as is.”
Foreclosures offer an array of investment opportunities both for seasoned entrepreneurs, as well as novice investors. Given that there is a clear motivation to sell, foreclosure properties are usually sold below or at market value, which gives buyers the chance to either flip, rent or wholesale the property and make a substantial profit.
A sheriff’s sale is a public auction where investors can bid on foreclosed properties. Owned by the bank, the properties are sold at a sheriff’s sale to recoup the outstanding balance of the mortgage loan. Sheriff’s sale are held locally in individual counties within a state.
After purchasing a property at a foreclosure sale, investors have the following opportunities to monetize their investment.
When it comes to financing investments in foreclosure properties, there are several options open to buyers. These include the following:
Though investing in foreclosure properties can be a risky venture, seasoned investors with solid financial backing can do quite well in the foreclosure investment market. Here are just a few success stories from the frontlines of foreclosure investing:
There are significant differences between investing in retail real estate and distressed real estate. In order to make successful investments, it is necessary for investors to understand the basics. The following steps will help you make smart investment choices:
Foreclosure properties are often sold at below market values yet investors should be aware that homes can have liens or mortgages attached to them. Therefore, it is essential that when investors are looking for foreclosure deals, they gather as much information as possible about the property in question.
