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Foreclosure Investment: Know Your Options

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By : Karim El Sheikh    99 or more times read
If you are planning to invest money in real estate, you have probably heard about the lucrative opportunities presented in view of the growing number of homes nearing or in foreclosures. In fact, some people have been loosely using the phrase ‘tsunami of foreclosures’ to describe the phenomenon and investors are scrambling to take advantage of the real bargains that can be created with foreclosed homes for sale. But the question remains “Is it safe to invest in foreclosed properties?” or “What are the options when investing in foreclosures?”

Bargain Shopping for Preforeclosure Deals

If you are in the market for property investment, the residential real estate industry is definitely where you want to get started. While it is very unfortunate to see a lot of people lose their homes, for any real estate investor, it presents a perfect opportunity to check out foreclosure deals that typically go as cheap as 25% to 40% below the market value. So whether you are looking to buy a new home for your family or buy a property to sell it in the future, this can be a very good investment for your money.

The preforeclosure period is the ideal time to purchase any distressed property. Preforeclosures start when the lending institution sends the homeowner/borrower a notice of default or a lis pendens – depending on what particular state the property is located – informing the borrower/homeowner that their loan payments are delinquent.

During this period, a borrower/homeowner will easily recognize the fact that an impending foreclosure will severely affect their future credit options, which means they are most likely to sell the property before it can go into a foreclosure. This is a more practical choice for them most especially if they have no means of bringing the payment up to date. This is a great chance to save several thousands of dollars on a property in preforeclosure and at the same time receive immediate equity for the property.

Consider Buying REO Properties

A number of investors purchase foreclosed homes in auctions, but a more common practice is to buy foreclosed properties from financial institutions and banks that have seized them. The latter is known as REO or real estate owned. There are a number of real estate agents that are known to specialize in facilitating the sale of REO properties.

It is a common scenario to find most of the REO houses have grown decrepit and often sit empty for months before it is sold. Typically, by the time it is sold, it is in bad shape and is not eligible for mortgage. As a real estate investor, you can purchase the property, fix it up and sell it. This is commonly known as ‘flipping a house’.

If you have seen a number of foreclosure listings, you have probably come across descriptions such as ‘newly remodeled’ or ‘completely rehabbed’, all of which have been flipped into a better shape and condition. For many prospective foreclosed home buyers, this presents a better alternative since a well maintained home would make it eligible for home loans.

If you are ready to start making investments, it is always a good idea to study the market and know what you are up against. Yes, investing in foreclosed properties is a wonderful way to cash in, so to speak. But you will increase your chances of success if you are well prepared and already know your way around the industry. is the area to find a foreclosed house for sale in your area. Search all the latest foreclosures today.

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