Locating Foreclosure Bargains
Purchasing a foreclosed property presents the opportunity to pay much
less than you would typically pay on a comparable property. If you are
an investor this means that you can often invest the money you have
saved in making improvements in the property and then resell it at a
future date and pocket the profit.
While buying a foreclosed property can certainly provide many
advantages, there are also some disadvantages and risk that are
associated with such a move as well. In order to purchase a property at
auction you must make sure that you have sufficient funds at the time of
the auction, either through a cashier's check or cash up to 10% of the
purchase price. Within thirty days you must be able to make arrangements
for financing in order to complete the purchase of the property or you
run the risk of losing the property and the deposit. You must also
accept the fact that you will be purchasing the property as is, which
means that you usually will not have the opportunity to make an
inspection. As you will have no idea of the condition of the interior of
the property, it is imperative that you make sure that you pay a low
enough price to ensure that you will be able to make necessary repairs
or improvements and still make a profit when you resell the property
later.
Purchasing a property during pre-foreclosure as opposed to during an
auction presents two critical advantages to the investor. First, if you
purchase the property from the homeowner prior to foreclosure there is a
good chance that you will be able to nab it at a good price. Many
homeowners in this situation are quite willing to sell the property for
just what they owe on it in order to avoid having a foreclosure appear
on their credit record. Second, you have the opportunity to actually
view the interior of the property before you purchase it and know
exactly what you are purchasing.
Buying a property in pre-foreclosure is actually quite a bit like
purchasing a property under normal circumstances. You negotiate a
purchase price with the homeowner, sign a purchase contract and then
finalize the transaction. The main difference between the two situations
is that rather than the homeowner listing the home of sale with a real
estate agent, you will instead be looking to locate prospective
homeowners to contact in an attempt to purchase their home before they
go into actual foreclosure.
You can locate homeowners who are in the first stages of foreclosure by
researching public notices. This can be done at the county clerk's
office as well as by reviewing the local newspaper where public notices
will be listed by the attorneys of banks handling foreclosures. With
just a bit of research you may locate a homeowner who is in the early
stages of foreclosure and who will be willing to sell their property in
order to avoid the full foreclosure process. There are many reasons why
a homeowner may find themselves in this type of situation and it is
important for you to understand those reasons so you can understand the
motivation of the homeowner.
One of the most common situations is a separation in a marriage. This
can be a more difficult situation in which to negotiate a sale during
pre-foreclosure because the other spouse may be absent and not available
or willing to sign the papers to transfer the property. Another common
situation involves the failure of a business. This is often a good
situation in which to negotiate because the individual may be more
willing to sell the property rather than endure the embarrassment of a
foreclosure. In some instances foreclosures occur because the homeowner
simply could not make the payments and have found themselves in a
financial bind. If you are able to offer them a way out of the situation
where they do not have to face a foreclosure appearing on their credit,
they may be willing to negotiate with you in order to get out of a bad
situation.
The advantages to purchasing foreclosed properties can be tremendous,
including huge savings and the potential to turn a profit if you are a
real estate investor. The key is making sure that you do diligent
research ahead of time and also understand the risks that you may be
taking in exchange for the opportunity to save a significant amount of
money on your next property purchase.
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