In this current real estate crisis, many people are loosing their homes because they can’t make the payments or walking away because their house is worth less then the amount owed. It was reported by CNBC on July 24 that foreclosures now represent half of all the homes sold in the US. Although this is downright scary to a highly leveraged homeowner or speculator, this is also an opportunity of a lifetime for anyone looking to buy real estate at these depressed prices.

If you look at any successful real estate investor they accumulated much of their wealth by buying when there was a downturn in the market. Donald Trump is a good example of someone who was buying up real estate real when everyone else was selling as illustrated in the quote. “When I first started out in Manhattan, everyone was saying what a terrible market it was, and if I’d listened to them, I would not be where I am today. There are always opportunities.” Donald Trump.

Many of the most successful real estate investors currently see this as an opportune time to buy real estate (Mr. Trump is on this list) and see pre-foreclosures as the greatest means in which to negotiate the best deals.The main reason is unlike foreclosures, a pre-foreclosure is made privately between the owner and buyer and therefore avoids the bank auction foreclosure process. This provides many advantages to the buyer including more time to inspect the inside of the house and a better chance to establish a mortgage with a bank.

When looking to purchase a pre-foreclosure you also need to pay closer attention to the macro aspects (I’ll cover micro aspects in a later article) of the property within the community in order to limit your risk as much as possible. Some of these property macro aspects are:

  • Do you notice an extremely unbalanced number of foreclosures available in the area? It’s preferred that your pre-foreclosure deal is the only one in the neighborhood.
  • Check with the local tenants to see what the rent levels are and whether they have been increasing or decreasing over that last little while.
  • What is the local economy like at the town, local city and/or county level? Is the unemployment rate increasing or decreasing?
  • Check with the local government to see of any upcoming infrastructure projects that will be taking place within 2-3 years. Projects such as new shopping malls, highways, train/subways lines, building permits for new businesses being established, new parks near the property, etc.
  • What are the demographics? If there is an extremely high level of seniors in town and only a small percentage living in nursing homes, guess what, it could cause a housing surplus within 10 years or so.
  • Location, location, location. Nothing new here but be particular conscious with pre-foreclosure because some can be in questionable neighborhoods.

    • If you do your due diligence and find answers to these questions when considering a pre-foreclosure then you will feel secure knowing whether or not it is a good community in which to invest in. Next article will discuss what to look for within the estate itself.

    Read reviews on the best pre-foreclosure sites to see what they have to offer at government auctions review or go direct to pre-foreclosures

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