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Joined: Jan 2006
Posts: 6035
Building a Foundation
  
   United States
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 Jun 10, 2008, 03:18:16 PM | #2 |
Forclosures can be profitable but you have to understand the way they work before you begin to think about buying forclosed properties as an investment.
To begin with, forclosures are usually sold in a public auction and you *must* be present in person (or have a representative prestn on your behalf) with the money in hand in order to purchase a property up for auction. This in itself presents the most potentially daunting task when operating with forclosures.
The trick is finding some way to find properties that are in pre-forclosure and try to work with the homeowner and the mortgage lender to make a purchase that will work well for all three parties involved (you, the homeowner and the lender). I don't want to let the cat out of the bag but I do know a real estate broker who is placing ads in the local newspaper and on Craigslist asking homeowners who are in risk of forclosure to contact him for assistance. When confronted with the reality of forclosure, most homeowners will try to find a way out just to save their credit rating and the mortgage lenders know following a forclosure to the end will lose them money (but in the latter case, the FDIC and other government agencies will cough up the losses to bail out the lender).
Another risk of dealing with forclosed properties is you have to understand the mentality of a family losing their home and that the home may not be in perfect condition as would be with buying a property that is up for sale.
Those are just a few of the complexities relevant to buying forclosures. and remember, you will need the cash up front. You can't assume a mortgage to buy these type of properties although you could take equity out of an existing property to leverage it for the cash, but that's another story.
I started an article series on the C4G blog about How to Find Forclosure Listings - Real Estate Investing using one of the best search tools available (and they offer a 7 day free trial). I'm just giving you a quick response here but stay tuned to the blog (or subscribe to it's RSS feed) because that article was only the first installment of the series that I'm currently researching.
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Joined: Mar 2008
Posts: 158
 United States
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Jun 11, 2008, 09:34:27 AM | #4 |
As Dave said, you need to have the cash in hand to secure a forclosure property or to make a pre-forclosure deal. I am very interested in this topic but I don't have much liquidity and my equity is limited since my wife and I are only the 5th year of our mortgage and most of what we've paid is interest.  |
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