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