7 Things To Consider Before Investing In Foreclosure Properties

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Investing In Foreclosure Properties Best Practices

Investing in foreclosure properties has always been popular, but has really skyrocketed from this last economic crunch. Maybe you’re caught the fever and want to get in on the action. Or perhaps you’ve already made a profit investing in foreclosure properties.

Either way here are 7 different circumstances you should evaluate before purchasing a foreclosed upon property.

First let’s be clear on what we’re referring to as a foreclosed property. This happens when a borrower on a property fails to meet the terms of the loan they have made using the real property as collateral. In the US the holder of the note/trust deed, etc. is usually a banking institution, loan company, credit union, or government or business entity.

Know Your Local Foreclosure Property Laws and Regulations

Each and every State has laws in place that govern specifically how foreclosures must proceed in that State. The first thing you do is get familiar with the foreclosure regulations governing the State where you want to be investing in foreclosure properties. This is a crucial step, otherwise you could end up acting contrary to the law, which will not end well.

calculate investing in foreclosure properties

As you launch out into this field of investment in foreclosure properties there is much to learn. The next thing you should begin doing is to build a team of professionals. You’ll need them along the way in order to complete foreclosure investments from start to finish.

Build Team Connections That Will Help Your Foreclosure Business

Some questions to ask yourself are: How and where will you find out about properties that are in foreclosure? There are many ways, and we’ll list a few here:

  • Real Estate Agents
  • Newspapers
  • Listing services – online and offline
  • Banks and Credit Unions
  • Government Agencies

Once you find some possibilities the next thing is to do some due diligence on the property itself. And also research on the surrounding neighborhood.  Much of the time when investing in foreclosure property the properties are sold ‘as’is’, and sometimes without inspection. The terms are most times all cash, so you will need to have your financing prearranged. Because you will be buying ‘as is’, there is some risk involved. The bad news is you will not know until after you have taken possession and had a formal inspection how much any repairs will cost you.

Use Precaution On ‘As Is’ Foreclosure Properties

A word of caution, be very careful when buying ‘as is’ properties. A big problem like foundational problems, termites, extensive water damage and the like can quickly turn investing in foreclosure properties into someone’s worse nightmare.

My advice to new investors is to only buy properties that allow you to have your contractor or inspection service evaluate so you don’t ‘lose your proverbial shirt before you even get your feet wet in the business.

After you have completed the steps spelled out above, it will be time to start delving in in a hands-on way. By now you know how your State or local government announces foreclosures. Public auctions are a very popular way for lenders to dispense of their Real Estate Owned. REO’s refer to the inventory of foreclosed properties a particular entity has on its hands.

Learn State Laws For Investing In Foreclosure Properties

All of the States I’m aware of carefully regulate how these lenders are able to offload their REO properties. They are limited by the law as to any profit they can make on their REO properties.  Normally they are only allowed to recoup their costs.

Because of this you may find some great deals. However auctioneers get a piece of the pie and so may several other middlemen. There may be all sorts of fees stacked upon fees. Know you total costs before proceeding. Underestimating your costs cuts into your profit, or can put you underwater. No one wants to owe money on a property they purchased to make a profit.

Make sure you have investigated the title history and current standing of before you finalize investing in foreclosure property. Make sure you investigate any and all liens against the property, as they could be fatal to your investment.

Find out the predominant ways that foreclosure notices and auctions are publicized in your local area and follow those methods. They may be newspaper notices, weekly, biweekly, etc. public auctions on the steps of the public courthouse or other predesignated locations. It is a good idea to attend several of these to see how they work before you begin bidding.

investing in foreclosure property

It is of paramount importance for you to decide what you are going to do with any property you acquire, before you finalize the purchase. Will you fix and sell it, rent it out, live in it? Make sure all of the parameters are in place to accomplish your goal before the purchase is final. May sure you leave yourself breathing to get out of the transaction before its set in stone. Right in your bid or offer, make sure you have conditions you may exercise to get out of the deal. At this point you should be familiar with the flexibility of the agency you are dealing with  Do this in case hidden info comes to the surface that will adversely affect your investment in that specific deal.

Larger metropolitan cities sometimes have publications specifically dealing in foreclosure properties only. It’s your job to get familiar with how procedures go in your local jurisdiction. Be wise and prudent about investing in foreclosure properties and you can make quite a profit for yourself.

Follow your own inner guidance and stay away from investing on foreclosure properties where you get an inner gut check, or have a bad feeling about the transaction. Above all base your decisions on sound mathematical evaluation if the numbers, feedback for professionals, and your own judgement.  Avoid the many pitfalls of investing in foreclosure properties and practice these winning approaches so as to make sure you come out meeting your goal in the end. Click here for further instruction and strategies when investing in foreclosure properties.

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