The great thing about real estate investing is that you have several more options than you would with other forms of investments. One of those options is buying foreclosure properties. Buying foreclosures can be a lucrative way to invest in real estate, but it must be done strategically. Here is what you need to know about buying foreclosures and real estate foreclosures.
How do buying foreclosures and real estate foreclosures work?
A foreclosed property is one whose title has been taken over by the lender because the homeowner has failed to pay their mortgage. The process to purchase a foreclosed property can be in one of the three following ways:
- Short sale
While a home sold through a short sale is technically not foreclosed, it is a way to buy a property at a reduced price. In this case, the homeowner sells the property for less than what they owe on the mortgage. It is the lender, not the homeowner, who needs to approve your offer. You may be waiting a while for this to finalize. (Click here to learn more about short sales)
This is typically the faster way to buy a foreclosed property. However, most auctions only accept cash payments, and if they do allow mortgage financing, you need to have your pre-approval ready to go. Purchasing from an auction also means taking the property “as-is,” you won’t be able to do an appraisal or inspection.
- Buy from a bank
With this method, you are buying the property directly from the bank, bypassing the homeowner completely. The lender will clear any title issues and liens and evict the homeowner before the purchase. Though these homes are typically sold “as-is,” you will usually have the chance to view the property and order an inspection before closing.
Benefits of buying foreclosures
As an investor, you want to look for the most strategic purchases. Buying foreclosures means that you will be purchasing at a lower price. This is because a lender is selling the property and they want to sell quickly to earn a profit, or at least get some of their money back. Additionally, with foreclosures, you do not have to worry about title issues. The lender clears any liens and cloudy title problems ahead of time, so as soon as they get a buyer, they can get through the process quickly.
Tips for buying foreclosed properties
Know what you want going in. As an investor, you need to be decisive. This means having your investment strategy planned out before buying. Get your financing together ahead of time and decide whether you will flip and sell, hold, or renovate and rent.
Know this is not a get-rich-quick scheme. Investing in foreclosed properties requires savvy planning and decisiveness. It can be an effective form of income if done strategically.
Intro to Real Estate
If you are interested in learning more about buying foreclosures and real estate foreclosures, consider our team’s real estate education courses. We know firsthand the freedom and possibilities real estate investing offers, and we want to share what we know. Our courses are for those looking to leave their 9-5 in pursuit of something more fulfilling, no matter their prior experience or learning style. We use real-life investing scenarios to effectively equip our students with the tools they need to succeed. If you are ready to invest in your future, start by investing in your education. Click here to contact us today.