Buying foreclosed properties is a good way of buying properties at below market value.

Homes become foreclosed upon because property owners cannot pay their mortgage. Once the owner of the property misses a payment, the lender will begin the foreclosure process on the property.

Now that the lender has foreclosed on the property, the lender interest at this stage is to recoup their investment. The property will be placed up for sale via an auction or with a Real Estate Agent. Opportunity now exists to purchase a home for less than the market would demand.

Things To Know

Taking the time to do a bit of research means no nasty surprises after you buy a property.

Research how much work will be required to bring the property up to date. Foreclosure properties are often in varying states of disrepair and will need a little work to make then livable before resale or rental. If you buy a property and it needs a lot of work you can end up with a lot unknown expenses. Get a professional to look at the property. This will cost you a fee but may save you a fortune in the long run. This professional can tell you what needs to be fixed or replace and how much it will cost to bring it up to date.

Research the final state of the property. Foreclosed properties sometimes have loans taken out on them or overdue utility bills. You will have to pay these. Do some research into the public records to establish the financial state of the property before you buy it.

Research the value of the property. This way, you will know how much money you can invest and still make a profit. The best way to find out how much a property may be worth is by looking at similar properties in the same area.

Finding Foreclosed Properties

Finding foreclosed properties may be difficult if you don’t know where to find them. Foreclosed properties are sold at public auctions. The person with the highest bid gets the property. Finding public auctions to buy foreclosed properties dose take a bit of work. You can find public auctions by looking in the local newspaper, usually in the real estate section. Alternatively, you can call or write your county court house. In many cases, the county court house will be in charge of the public auction. This is also a good way to find out about the procedures you will need to follow to participate in the auction. Another way to find public auctions is via the Internet. Some websites provide lists of foreclosed properties categorized by area.

Pros and Cons

The main advantage of buying a foreclosed property through auctions is the profitability - the difference between the highly discounted price and the estimated value you can sell it. Normal foreclosure property auctions have a six-week notice enabling the interested buyers to inspect the property, assess its total cost (including fix ups and other issues) and research the market price at which it can be disposed of.

On average, expect to save about 30% when buying a foreclosed property. This is perfect for investors looking for rental properties or first time homebuyers.

Because most properties are in good condition, the home may only need minor cosmetic improvements. This may include a coat of paint, new carpet, etc.

The main disadvantage to buying a foreclosed property from a court auction is that it requires a lot of capital investment. Another major disadvantage would be the transfer of title that involves a great risk. If your research is not correct or incomplete it could lead to major losses in the process of buying and selling foreclosed property. Higher the risk, higher the gain, therefore one should be doubly careful and do significant research before bidding on an interesting property.

Stewart Dunham writes on marketing and business related issues. You can learn more by visiting my blog, Foreclosure Investments at http://foreclosure-investments.blogspot.com

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