Some Risks As Well As Rewards Of Investing In Foreclosures
There are many different things to invest in these days. One investment route which many individuals take is foreclosures. Foreclosures occur when the current homeowner of a property fails to pay their monthly mortgage, and the property is repossessed by the lender. There are various risks and rewards which go along with investments of this type.
Advantages and Disadvantages of Buying Pre-Foreclosure Properties
One type of property sale which relates to foreclosures is the pre-foreclosure sale. A pre-foreclosure sale occurs when the lender allows the homeowner with past due mortgage payments to sell the home on their own, and pay back the lender what they can from the sale of the home. The lender often agrees to this, so that they do not have to get involved with possessing then reselling the home, and the homeowner likes this option because it prevents foreclosure. The investor also benefits from this type of sale as well.
Some advantages to purchasing an investment property via pre-foreclosure sale include discounted price, speedy purchase and great profit opportunities. As for the disadvantages, the investor who buys property by way of a pre-foreclosure sale may find that the homeowner is hard to contact and/or unwilling to sell.
For those who wish to purchase pre-foreclosure property, you should do your independent research, approach the homeowner in a courteous manner and ensure that they will make an offer that will not cause them to lose money in the end. By doing so, the investor may find that buying a house by pre-foreclosure sale, will work to their advantage.
Advantages and Disadvantages to Buying at a Foreclosure Auction
Another way to purchase foreclosure property is through a foreclosure auction. Auctions of this type are usually held at the local courthouse of the county where the property is located. This is a common way for foreclosed properties to be sold and this also has its pros and cons.
The main advantage to purchasing property at a foreclosure auction is the reasonable price for which one can bid on a property. Although there will be other bidders, the resulting price is usually one that is quite attractive. Another advantage relates to the profit which the purchaser will see when they resell the home. Since the home was won at a reasonable amount, when the highest bidder goes to resell the property they will most likely see a good profit margin from that sale.
With regard to the disadvantages, purchasing a home at a foreclosure auction has a few which are associated with it. The first disadvantage is the inability to inspect the property. As auction homes are usually sold as is, the bidder who wishes to adequately inspect the home beforehand will be unlikely to do so. Another disadvantage to purchasing a home via auction is that the purchase price and deposit is due via cash or cashiers check. In many instances, it may be difficult for many investors to obtain on short notice.
Advantages and Disadvantages to Buying Real Estate Owned (REO) Properties
One last type of property purchase which relates to foreclosures is real estate owned properties, or REOs. An REO is when the property returns to the exclusive hands of the lender, and then needs to be sold from that point. The lender is looking to sell their newly acquired property as soon as possible, since they do not want to be in charge of the property and its necessary maintenance. The lender will then look for potential buyers of the property.
Some advantages to buying an REO are that they usually have good title, property taxes will be up to date and repairs may have been made to the property by the lender to ready it for sale. As for the disadvantages, those who purchase REOs may find that the savings which they see by purchasing an REO are not as great as they could be, and therefore, the profits may not be that great as well.
It is extremely important to do independent research with regard to the properties and purchase methods, ensure necessary funds for purchase and inspect the property whenever possible. This will help to make sure that the buying process goes as smoothly as possible.