Investing in Real Estate Foreclosures – the Pros and Cons

Real Estate

Anyone looking for investments has a wide array of options, with real estate foreclosures being one of the better choices for those who enjoy this type of investing.

Real Estate foreclosures are a fast way to make some very good money and the market is always available.


Foreclosed home are constantly being auctioned off for much lower prices than on the regular market. As an investor, you can bid on these foreclosed properties and make a good profit. Provided you get the bid for a good amount.


How do these homes become available? In simple terms, a real estate foreclosure happens when the owner of the home stops making payments and defaults on the note.


This leaves the mortgage lender no other choice but to foreclose on the loan. The lender will try to sell the home to at least make back the amount tied up in the loan.


In many cases, you, as an investor, can buy homes like this in a pre-foreclosure sale. What this is, is a sale that the mortgage company, or lender, lets the person owning the home make. If the homeowner can sell the home quickly, they can pay back the loan company and keep the rest.


A pre-foerclosure sale is a win-win situation for the homeowner, investor and the lender. The homeowner is able to get the home sold and the bank paid without having a real estate foreclosure go on their credit history.


The loan company loves it because they don’t have to deal with having the extra expense in trying to sell the home.


Investors really profit from situations like this because the homeowners are desperate. They will usually take anything to get out from under the mortgage. You also are able to get the real estate fast.


While real estate foreclosures can be a great way to profit, there can be a downside as well. You may find some circumstances in which the homeowner is being difficult to work with and come to an agreement.


Another sore spot can be competition from other investors. Depending on the area you live in, you may have several investors looking at trying to buy the same home that you are.


The other obstacle can be the cost. If you buy the foreclosure at the auction you’ll have to pay the full purchase price after the sale. This can be overwhelming for the average investor.


With that said, if you have the funds available and you enjoy real estate, then real estate foreclosures can be an excellent way to make big profits in a short amount of time.