Real Estate 101 - Investing In Foreclosures

Making money from foreclosed properties is an extremely specialized area of real estate investing that can be very aggressive. Because investing in foreclosed properties is a niche market, those who are involved in this type of investment are highly educated. Real estate investing is a lucrative venture. It is therefore important to learn as much as you can about how to buy and sell this type of property for maximum profit.

Understanding Foreclosure

Many people picture homes that are in disarray or infested by termites or covered with mold when they think of foreclosed properties. Foreclosed properties can also include mansions and commercial property worth millions of dollars. Properties are not automatically foreclosed on because they have been how to sell your home condemned or neglected to be maintained. The previous owner failed to make the payments. In such cases, the lender will take the property back and try to recover the money invested in that piece of real estate.

Choosing Your Niche

You will first need to determine your niche before you can get involved in real estate investing by focusing on foreclosed property. You should target one type of property at a time. You might choose to focus on fixing up properties that you can then sell. You might even specialize in commercial properties.

There are many properties available, no matter what your specialization. The number of properties that are foreclosed in the United States each year is over half a million, and this trend continues.

The Right Stage of Foreclosure

You will need to know the three main stages of foreclosure before you consider buying foreclosed property. These are pre-foreclosure and auction/trustee sales. Real estate owned is the last stage. Each stage has its pros and cons, so it is possible to prefer to close the deal at one stage. It is up to you.

The homeowner will have received a letter from the bank stating that the property will be foreclosed if the payments are not made by a specified date. At this stage, you can approach the real estate owner and offer to buy the property before foreclosure happens. This stage is risk-free and allows you to help someone out of a jam. However, you must ensure that there aren't any liens or judgments on the property before you close the deal.

The property is either put up for auction, or for trustee sale during the auction stage. This stage occurs when the owner fails or is not able to make the required payments in accordance to the terms of the previous stage. You can buy the property by paying the lender during this stage. The lender does not have the right to take back the property. You may be able to get a lower price. You will need the cash to purchase the real estate. If there are any problems with the property, you must also purchase it "as-is."

The lender must buy the property back if no one bids on it. At this stage, the property is considered Real Estate Owned. The lender might attempt to profit from the property at this point. You can usually get a great discount at this stage. You will also have more time to research the property before you buy it.

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