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How to Make Money Buying Foreclosed Homes


If the American dream is owning your own home, then the American nightmare must be facing foreclosure. With many risky mortgage loans (interest only mortgages, adjustable-rate .. etc) easily available, buyers are able to purchase a more expensive house than they can afford. Unfortunately, it will be devastating to many home buyers when these crazy mortgage loans are converted into higher interest loans or fixed rate loans eventually. As a result, we are seeing a rising trend of foreclosure in the US.

Besides losing a major investment, the person facing foreclosure is also faced with a blot on their credit record that could take years to repair. Being faced with losing one's home is one of the most stressful situations that anyone can encounter. It's an unfortunate fact that another's misfortune often presents opportunity for profit to the canny investor.

A survey released in early 2005 by 'The National Association of Realtors' in Washington, DC showed that over 20 percent of all residential real estate transaction in the US went to real estate investor rather than home buyers. Buying a house under notice of foreclosure is one of the best ways for investor to acquire property for below market value and turn it around into a profitable asset. If that feels a little ghoulish, it may help to know that by buying a house from the owner at certain stages during the foreclosure, you can help them prevent the foreclosure and minimize the impact on their credit rating.

In order to make the most profit from investing in foreclosure properties, it helps to understand the stages of foreclosure, and the possibilities for profit inherent in each one.

Pre-foreclosure sales

The first step in the foreclosure process is a filing of notice of intent to accelerate foreclosure. The period of time that the mortgagor has to respond varies from state to state from a few weeks to a few months. During this time, lenders are often open to negotiation for repayment of the loan to bring it current or otherwise pay off the defaulted amount. One of the more popular ways of doing this is for the owner to find a buyer for the house who will pay off the defaulted amount and satisfy the requirements to stop the foreclosure.

Notices of foreclosure and sale are a matter of public record. A little research at the city courthouse will get you a list of homes that are in the first stages of foreclosure. You can often work out a sale with an owner who would prefer to sell house fast for enough cash to satisfy the mortgagor.

Foreclosure Sales

If the owner of the property fails to redeem the foreclosure by paying an agreed upon amount, or making arrangements to do so, the property proceeds to a foreclosure sale. Foreclosure sales must be publicly announced and certain regulations adhered to. Depending on the local ordinances, there may be a requirement for a minimum bid, and there is nearly always a requirement that the winning bid must be paid in cashiers' check at the closing of the auction. The sale is by auction, and there is a requirement that the highest bid be accepted - even if that bid is from the current owner.

The city clerk's office and your local newspaper are the two best sources of information on upcoming foreclosure sales.

Less common but not unheard of are sales of properties deemed to be abandoned. These are generally held by municipalities and towns in an attempt to recover back taxes owed on a property. A thorough title search will reveal if there are any liens or other debts outstanding against a property. A tax foreclosure sale can be one of the most profitable for a real estate investor if there are no other outstanding liens against a property.

Getting the foreclosure list is the most important step in this real estate investment opportunity. There are many online services that provide huge foreclosure property listings with over 50,000 listing updated daily. You can get instant access to this large foreclosure database to find the most up-to-date bargain. Start your free trial now!.


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