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