Foreclosure Real Estate
Considering investing in foreclosure real estate? You're not alone. From first time home buyers to seasoned investors, foreclosure properties can be a smart choice. They can also be your worst nightmare. Taking time to understand the market and what is occurring behind the scenes can help buyers determine if purchasing foreclosure property is the best option.
Nearly every day the rules for buying foreclosure real estate change. In February 2009, President Obama unveiled a $75 billion mortgage relief plan. Devised to provide assistance to nearly 9 million struggling homeowners, the Homeowner Stability Initiative offered incentives to mortgage lenders to engage in loan modifications with borrowers facing foreclosure.
In October 2009, MSNBC published a report claiming Obama's financial relief plan "may simply delay mortgage defaults for many." A government watchdog group predicts a new wave of foreclosed homes in the near future which stems from skyrocketing unemployment rates that occurred after the subprime lending fiasco.
While no one can predict exactly how many new foreclosures will occur, estimates range between 3 and 4 million. In addition to the millions of vacant houses already on the market or held by lending institutions, real estate investors will have a plethora of homes to chose from.
Several options exist for buying foreclosure property. Most repo homes are sold at auction. While it's true you can locate great deals through foreclosure auctions, it is oftentimes like finding a needle in a haystack.
Most of the junk homes end up on the auction block. These houses require substantial repairs or renovations. In some cases, borrowers or tenants continue residing in homes until forced out through eviction. When buyers purchase houses through auction and people reside there, the buyer must initiate eviction. Obviously, this isn't the best way to start out with a newly purchased home.
Another option is to buy foreclosure real estate directly through banks. If properties don't sell at auction, the lender takes possession of the property and is responsible for its care. Once property becomes bank owned, liens, judgments and eviction is handled by the mortgage lender.
Bank owned homes usually cost more than real estate sold at auction, but the time-consuming messy details are resolved before deed ownership is transferred. Also referred to as real estate owned or REO property, these homes are sold through banks' loss mitigation or their designated realtor.
Working with bank loss mitigators can be frustrating, so be prepared to have patience. Loss mitigators are overwhelmed with foreclosures, loan modifications and short sales. On average, it can take between four and six months to close a deal on real estate owned homes.
Banks aren't going to give away foreclosure real estate. They are in the business of making money and strive to obtain the highest price for properties they hold. It's not uncommon to engage in multiple counter-offers before reaching an agreement. Buyers should be prepared to walk away if they cannot obtain a decent price on reo homes. Suffice it to say, there are plenty of other properties to choose from.
One of the best options for purchasing foreclosure properties is to locate a private real estate investor, such as Simon Volkov, who purchases REO bank portfolios. Investors buy multiple properties at wholesale and pass savings along to buyers. It is not uncommon to purchase wholesale homes for pennies on the dollar.
These are only a few options for buying foreclosure homes. We invite you to learn more about the pros and cons and obtain a few insider-secrets via our foreclosure real estate article library. We also invite you to subscribe to our Investor's Club mailing list which provides multiple investment opportunities delivered directly to your email account.
Published on December 15, 2009 at 02:21 AM