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The Foreclosure Market: One Man's Trash is Another Man's Treasure

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By : Jacquelyn Marks    99 or more times read
One often associates the word, “foreclosure”, with a lack of money or nonpayment. Yes, these are reasons that people can lose their homes. However, regardless of the stigma, there is money to be made on foreclosure homes. The Recession has decreased the employment rate and increased the number of foreclosures in the United States. In turn, the real estate market has shifted, and we are now in a buyer’s market.

Benefits of Buying During the Foreclosure Process

With foreclosure rates on the rise, “a slower real estate market can translate into falling prices and home values”, reports the Mortgage Bankers Association. People cannot afford to make their mortgage payments, and banks are desperate to sell the foreclosures that they own. This places the investor at a strong advantage. With sellers placed in this frantic financial situation, foreclosure listings are increasing at startling rates and foreclosed homes for sale are priced to move quickly.

Foreclosure Auctions

Foreclosure deals are a way to make big profits in this market. Great deals can usually be made at auctions in which the foreclosure home is being sold for the amount that the previous owner owes to the mortgage company. These auctions require the investor to pay cash, but the amount owed frequently proves to be a great bargain. Nonetheless, the purchase of the home is not what makes the investor the money, but rather the resale of the home.

Often these foreclosed homes are in terrible shape and appear unkempt. This is the investor’s opportunity to update the house, and make it livable to sell it or “flip it”. The profit comes from calculating how much the house was purchased for as opposed to how much was spent on fixing it up.

In this case, an investor may have purchased a foreclosed home for $30,000. They could have spent $10,000 updating it. Once complete, they could put the house on the market for $100,000. This would make their possible profit margin $60,000!

Bank-Owned Foreclosures

Purchasing a bank-owned foreclosure home is another way to make a profit in this market. Banks cannot hold onto properties for long periods because the upkeep and property care costs them money. Therefore, the property needs to be sold quickly, which proves to be in the best interest of the buyer.

In order to move the home swiftly, the bank will agree to such concessions as negotiating prices, down payments, closing costs, etc.; paying the Realtor commissions and fees; and clearing any title issues such as liens or back taxes.

All of these negotiations can add up to a great savings for the investor. In turn, this large savings will increase the profit margin earned when either flipping the house or promoting it as a rental unit and allowing tenants to maintain the home while they pay the investor.

Buying Foreclosures - Is This a Better Option for You?

For those who are looking to invest little money and get a big return, buying foreclosed homes is a great option. The investor has the choice of how much to invest in a property from start to finish. Once the property has been repaired, the investor has the option to either keep it as a rental unit or sell it. In either situation, money is made. is the leading resource in online distressed property listings.

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