Buying Foreclosed Properties: Find Distressed Real Estate Investments

Investing in foreclosed properties can take many forms. Real estate foreclosure is a long and arduous process. Many times investors can enter the process and purchase a great investment property at a steep discount to the market. Consider the following ways to purchase pre-foreclosed and foreclosed properties.

Short Sales

Before properties go into foreclosure, there is typically a point where a borrower can no longer afford their mortgage or the property value dips below the mortgage values. This can create a short sale opportunity. A seller will often try to execute a sale before their loss their home to foreclosure, so it could be the perfect time for an investor to help a distressed seller avoid a costly foreclosure and pick up a great investment property.

Many realtors and agents are marketing these properties today because so many property values have fallen so quickly. States like Florida, California and Nevada have a very large number of potential short sales. The challenge is getting the bank and the seller to agree on a price that works for the seller. Additionally, executing the transaction could take up to six months or longer.

Real Estate Auctions

Foreclosure auctions can take many forms. The first auction will be at the courthouse after the property has been defaulted and foreclosed upon. In this auction, the bank and investors bid for the property. Traditionally, the bank will bid up to the amount it needs to recover the loan. Foreclosed homes with equity are the best candidates for investors, because the bank is less likely to bid at or above a market price.

Assuming the bank purchases the property at auction, they will still need to market and sell the property, giving an investor another opportunity. Banks employ a variety of sales methods when it comes to divesting real estate. Many banks use real estate agents, so go back to the auction process; some publish lists so that anyone that may inquire about their portfolio. Larger banks will package similar properties in similar locations and bulk sale a portfolio.

These additional opportunities work for different investors. Wholesale or bulk sales of real estate could appeal to investors with large capital sources and a good in-place management team. Smaller one-off investors will not be able to handle the challenges of maintaining a portfolio of 20+ investment properties. However, these investors still have the opportunity to find good deals by working with a real estate agent to purchase foreclosed properties. These agents will have a list of the most marketable properties and will hopefully have experience working with banks.

Today’s market abounds with opportunities. Finding foreclosed properties has never been easier for all types of investors.