If you are looking to buy a residence for living in, or making an investment, it can be very profitable as well as risky, especially if you’re a novice investor. Buying foreclosures means taking certain steps and also doing enough research up-front with good planning. That’s what it takes to be profitable. Here are seven tips that will help you be successful in your foreclosure investments.
Familiarize Yourself with Foreclosure Processes And The Various Types of Foreclosures
The laws for foreclosures and the processes will vary between states, and sometimes even between counties. This means you need to get very familiar with all the laws, all the financing requirements, and all the procedures before you undertake making a foreclosure buy.
There are basically three types of foreclosures that you can give consideration. The first type is ‘pre-foreclosure’. This is when you buy a property from an owner before that mortgage gets into foreclosure. There are also ‘auction foreclosures’ that allow you to bid on certain properties in an auction. Then we have the ‘bank owned’ foreclosures, otherwise known as REOs where the properties that didn’t go at the auctions are now sold by the lenders.
Each individual type of foreclosure has its own laws, its own processes, and its own requirements. It also carries its own opportunities in regard to profit and risk. Auction foreclosures may be the most profitable but at the same time carry the most risk. You have no opportunity for inspecting the property’s interior before auction, and you are required to have the cash with you at the time of purchase.
The REO properties most generally are the safest. But don’t expect to find your best discounts here. And with the pre-foreclosures, you can negotiate with the owner in this type of process, but the risks can still be pretty high when seeking your bargains. There are many uncertainties that go along with this type of foreclosure as well.
Locate Properties Using Online Foreclosure Listing Services
You have many options available for finding foreclosure listings. You can skim the newspapers, or search the records at your local county clerk’s office, or go by way of a real estate agent. But the quickest and most convenient way to go is via an online listing service. They are always kept updated and save you lots of valuable time in research.
Line Up The Financing
It is of utmost importance to have a pre-qualified loan approved before you buy a foreclosure. When you buy an auctioned property, you buy it ‘as is’ just like the cars. This could make it hard for your to locate lenders who will lend you a mortgage for properties that haven’t been inspected.
Use Your Real Estate Agent
An experienced real estate agent can really be a great guide through the foreclosure processes when buying foreclosures. They can help you to locate the properties and assist you in preparing an offer.
Research The Values of The Homes
There are times when foreclosure properties are just not profitable. This is why researching home values is so important. Check the value of the other homes in that neighborhood and make comparisons to be sure you won’t be overpaying. The whole idea behind foreclosure investing is to find bargains. So you need to weight the costs, like assessing the property, which can run you from $300 to $500.
Get The Property Inspected
Make sure your get the properly inspected. You can hire an independent contractor who can deliver you an estimate of all the repair costs before you plunge into the actual buying of the foreclosure property.
Make An Offer
Get the real estate agent to assist you in preparing an offer. Make sure to include all the costs discussed above when you determine your offer price. And never use all of your cash in the down-payment. You are going to need some for repairs.
