Foreclosure investment must be approached like any major investment, requiring concentration, diligence, and careful research of local property, economy, and regulations.
Properties owned by a bank or real estate (REO)are actually foreclosed properties that are not sold to a third party in a court auction. There are several reasons why a property might not sell at auction, including offers that don't cover the foreclosure judgment. Once a bank officially acquires the title to the property, it is considered an REO. Once this happens, the bank usually hires a real estate agent to sell the property.
Short sales occur when a seller who is facing foreclosure but has not yet been subject to foreclosure sells a home, usually at a reduced price. The process is designed to generate ideal results for all parties involved: the seller avoids foreclosure, the buyer gets a good price for the home, and the bank avoids the entire foreclosure process and the cost. Prospective short selling buyers should be pre-qualified to get a mortgage, as banks need to ensure that the offer is strong and legitimate. Buyers must also inspect the home before making an offer and again before closing. Despite the name, short sales can take a long time to officially close, and buyers often realize that several months have passed since the initial inspection of the home and the closing of the short sale.
A reinspection will identify any conditions that may have changed since the original inspection and control systems and that may not have been accessible or operational previously due to weather or other problems. Any problems detected during the pre-closing inspection can be addressed with the bank before the buyer signs on the dotted line. A home that has been foreclosed and is now owned by a bank is known as an REO property. These homes are prone to problems that are not as common as other resale homes, usually due to lack of use and vacancy. When buying an REO property, potential buyers are likely to deal directly with the former lender or agent representing the lender because the seller is no longer present.
Lenders usually sell REO properties as they are, meaning that the lender will not perform any repairs to the home. If the home has significant defects, buyers can adjust offers by submitting a professionally prepared home inspection report to the bank, highlighting the defects and condition of the home, or by not accepting the offer. Auctions are often one of the riskiest ways to buy a home. In general, a home sold at auction is sold as is, with few opportunities for inspection. Auctioneers often schedule limited hours for interested buyers to view properties, but a full inspection is almost always not possible. Typically, these types of properties don't have the utilities turned on and don't provide access to important areas, such as narrow spaces or attics.
Buying a home through auction isn't recommended for novice real estate buyers, as they can't get access and advice needed to make an informed decision about potential serious and costly repairs that could make even a very low-priced home a bad deal. Most foreclosed homes are sold at auctions to companies or individuals who buy them reasonably, renovate them, and then resell them for a profit. This purchase, renewal and resale of properties seized by the bank is known as an investment in foreclosure. These asset managers send their REO properties to pre-established realtors who only work with REO properties. These real estate agents offer their asset managers a “broker price opinion” (BPO) that allows the bank to know at what price they believe the house should be listed.
Bank-owned properties are generally priced at competitive rates to facilitate a quick sale. REO properties are cash-only offers, meaning that any potential buyer must be pre-qualified by the bank and must show “proof of funds” such as a bank statement. Buyers must show that they have cash available to purchase a property. As an investor, start by determining your investment strategy and identifying what types of foreclosure opportunities you're going to pursue. Experienced investors in residential foreclosure markets know that relying on price differential as primary source of investment income is recipe for disaster.
When you've decided you want pursue foreclosure investment strategy it's time determine what opportunities are right for you and finally find properties that match your criteria. In most non-judicial foreclosure states process begins when lender files notice of default (NOD) at County Recorder's office warning landlord and any other interested person loan may be subject to foreclosure. There are three main types of foreclosed properties typical buyer should familiarize themselves with before making an investment in current housing market know corresponding structural physical attributes may affect each them. Not all foreclosures are good buy if consumers aren't fully informed about property or process buyer could make poor investment decision. Because so much cash is needed it's difficult for new investors invest in foreclosures by buying in court. A successful investor must understand ins outs of foreclosure including laws regulations different stakeholders how get most out of investment.
Any skilled investor will hire services of professional investment foreclosure advisor because gives them better chance having successful company. It's last resort way avoid actual foreclosure process protect yourself from some foreclosure costs involved in foreclosure on your property. As always there are pros cons though there more good than bad points struggling homeowner when choosing writing option over foreclosure. A professional foreclosure investment advisor like Val's will be able let you know when promising mortgage properties being put on market where locate them. Foreclosure investing requires knowledge understanding different types properties involved process order make informed decisions maximize return on investments.