| There is no doubt that homes in | | | | There may be liens on the property |
| foreclosure offer some of the best | | | | The Auction Phase |
| opportunities to purchase real estate | | | | This is where the most money can be made |
| significantly under value. But as with | | | | buying foreclosed homes. At auction, the |
| all things, there are upsides and | | | | foreclosed property is sold to the |
| downsides to purchasing property that | | | | highest bidder. If you do your homework |
| has foreclosed or is in the foreclosure | | | | before hand, you could realistically buy |
| process. | | | | a property for a fraction of its value. |
| Before you decide to invest in a | | | | Pros |
| foreclosed home, you should familiarize | | | | Discounts from 34 to 45 percent |
| yourself with both the advantages and | | | | Excellent return on investment |
| disadvantages of this type of property | | | | Highest profit potential |
| investment. Knowing what youre getting | | | | Cons |
| into ahead of time may just save you a | | | | Not able to inspect property |
| lot of hassles and headaches down the | | | | Auctions can be postponed |
| road. | | | | Need large cash down payment at auction |
| There are three foreclosure phases where | | | | Improper research can lead to disaster |
| it is possible to purchase a financially | | | | Could invest a lot of time and still not |
| distressed property. These phases | | | | win the property |
| include the pre-foreclosure phase, the | | | | The REO Phase |
| auction phase, and the REO (real estate | | | | The REO phase occurs when the lender |
| owned) phase. Following you will find a | | | | seizes control of the property in order |
| description of the three phases along | | | | to resell it and cut its losses. Since |
| with the pros and cons for each. | | | | the property has no value to the lender |
| The Pre-foreclosure Phase | | | | unless it sells, the lender is often |
| This is the phase where the owner of the | | | | extremely motivated to make a quick |
| real estate still has control. He has | | | | sale. |
| defaulted on his loan and is facing | | | | Pros |
| pressure from his lender to pay up or | | | | Discounts from 5 to 15 percent |
| face the consequences. He is desperate | | | | Title free from liens |
| to sell the property and clear his | | | | Tax arrearages paid |
| credit; this could add up to big savings | | | | Lender may do repairs or offer discount |
| for you. | | | | for repairs |
| Pros | | | | Cons |
| Discounts from 20 to 35 percent | | | | Low return on investment |
| Low down payment | | | | Remember; when you invest in real |
| Opportunity to inspect and research | | | | estate, there is a certain amount of |
| property | | | | risk that you must take in order to make |
| Flexible sales agreements | | | | a profit. This means that the properties |
| Cons | | | | that offer the most potential returns |
| Absent or unreachable property owner | | | | are the most risky. Be sure to calculate |
| Tough competition | | | | how much risk you can afford to take |
| A great deal of courthouse research | | | | before investing in foreclosed homes. |