Recently, there has been an increase of foreclosed properties in the housing market, making it tempting for real estate agents to be a star of the show, as they could buy it for much less than it is actually worth it. Some even buy properties in bulk and for a certain amount of money.
Yes, might sound very lucrative, but so that you be successful, you have to remain clear-headed and do not lure into anything, but rather think over few things:
- The biggest mistake people make here is that they do not think about other expenses, but simply buy the house, and sometimes even end up on a dead-end street, with not having enough money to do all repairing and reconstruction. So what could have been a fantastic deal, actually turned into a catastrophe. Writing down all your possible expenses and summing that up will for sure help.
- People, when it comes to foreclosures, often do not go and visit the house, but rather do that after buying it, and that is a mistake. Also, you should be checking how the neighborhood functions.
- Set up an inspection of the house, checking what does and what does not function – with the pipes being most important.
- Do not hurry, as you will not make a big profit in a short-term.
Also before actually trying to go and buy a foreclosure property you have to understand how it actually ends up there. Most common reasons are that homeowner did not pay the mortgage for more than 2 months, with authority having the option to take over the property, and put it up for sale.
Foreclosures are basically happening in any real estate market, across the USA, so it is not hard to find a be part of one. Though those sales can take few different forms, most common being:
- Pre-Foreclosures – This type of sale can occur when borrowers are actually notified that they have passed the 60-day mark, for paying the mortgage, but the property is still not offered for sale. In this period homeowner can try and sell the property, avoiding all other complicated procedures, that might occur. This one also might be the most profitable way, for real estate agents, that are buying foreclosures, as owners are often willing to negotiate, just to get everything settled out.
- Short sales – It occurs as a consensus between the lender and borrower, as the lender agrees that, there is no need to pay the full amount of mortgage. Though, often the homeowner has to prove some kind of reason that caused a financial breakdown. This one is similar to the classic foreclosure auctions, except it can take much longer, as approval of bank can last for several months.
- Sherriff sales – This one occurs, when lender notifies the borrower, about the default, and gives a short time to pay it out. The property is put to auction, so the lender can quickly get the money that he borrowed back. These auctions happen at a certain time and place, with the highest bidder taking it down. You can find a lot on this one in newspapers or other online advertisements.
- Bank owned properties – Usually, if the house is not sold in a normal auction, it goes back to the bank and from then on, the bank is the owner, where the REO team is in charge of managing it. Unlike, in the first few ways, banks do not sell the property at lower cost, as they would like to retain their loses, meaning that it is not the best way to get a foreclosure. Also, the property is sold, as is’’, meaning that there might be some unknown structural or maintenance issues left behind.
- Government owned properties – When buying a home, there is an option to get guaranteed loans from FHA. That means that once it goes into foreclosure, it returns back, and becomes governments property once again, where brokers are working for it, are in charge to sell it for as much as possible. There are no certain place or time auctions here, but rather you have to contact the broker or look it up at the website to find those properties (www.hud.gov).
We have to say once more, that that pure fact, that more and more families are having to leave their homes, is pretty worrying, but as it is, it is still better that someone buys off that property and maintains it, and that’s what real estate agents are for.