With so many foreclosure properties available in the real estate market, many a beginner has felt tempted to dive in and take advantage of the opportunities. However, if you are a neophyte in the real estate game in general and foreclosures in particular, you should beware. It is true that foreclosure offer excellent investment opportunities, but they also carry risks. If you think that you should just take your money to a foreclosure auction and see what you can get, then it is time to get better informed and follow some general principles.
Beginners are advised by the experts to stay away from foreclosure auctions because of the many risks involved. If you are not wary, you could end up with a money pit that is not worth the money you bid for it, and much less the money you will have to invest to rehabilitate it. At auction, you are not going to get any warranty whatsoever, meaning that you bid as is. You cannot be sure whether there are liens or other loans on the property. You cannot get professionals to inspect it and give you an assessment about the condition. If you are planning on a quick resale, an occupied property will keep you from getting into it quickly and turning it for a profit, and these are just some risks. There are so many others that beginners are better off staying away.
As a beginner, you have to start somewhere in the foreclosure market. You can try pre-foreclosure real estate, but that also has its risks. You have to know whether there are liens on the property because many owners may not reveal this fact. You also have to know whether there are unpaid taxes and how much. While you are at it, you have to find out if there is another person on the title who did not sign the deed. And do not forget to check into the utility bills because you will be responsible for them.
Make sure you follow the laws in your particular state and in the county where the property is located. Foreclosure law can be different within the same state, so you really have to investigate. If you do not follow the statutes, the seller can come back and rescind the sale, sometimes long after the sale was done. It is imperative to know and understand local laws, statutes and procedures regarding foreclosures.
Real Estate Owned or REOs are somewhat like a regular real estate sale, and they are the least risky foreclosure transaction. You will still have more risks than in a regular real estate transaction, but not like the risks involved in pre-foreclosure real estate and foreclosure auctions. You can check local listings, newspaper ads, the county records office and other sources to find foreclosed property in your area.
However you decide to do it, make sure you research laws, ordinances, deeds and loans so that you will have a foundation before venturing into the foreclosure market. You also need to know about fair market, comparable and property values. You also need to learn about neighborhood problems including poor construction, bad soil, septic problems, soil contamination and well problems, among others. If you do your research and study carefully, you may find that foreclosures provide you with an excellent opportunity to invest.
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