Foreclosure Properties can be an excellent investment, but first, the investor need to do his homework, be familiar with the local market, and understand the process, as well.

A property enters pre-foreclosure after a default notice is filed by the foreclosing lender against the borrower who owns the property. The different notices that are filed during pre-foreclosure include Notice of Default (NOD), Lis Pendens (LIS), Notice of Trustee Sale (NTS) and Notice of Foreclosure Sale (NFS). For most consumers, buying a pre-foreclosure property from a private homeowner is the most favorable of options. This is a best case scenario because the seller is able to get out from under a mortgage without destroying his/her credit rating, the lender is saved the time and expense of foreclosing on the property, and the buyer gets a below market price on a home. In addition, buying at this stage of the process allows you, the buyer, a chance to fully evaluate the property before making an offer.

The disadvantages associated with purchasing a property during the pre-foreclosure stage are few, but worth mentioning. As with any major purchase, negotiations between the buyer and seller can be difficult, especially since the seller would typically prefer not to have to sell the property in the first place. Secondly, transactions are time-sensitive, since there is pressure to complete a sale before the property goes to auction.

Foreclosure auction sales are typically the domain of the professional investor. These properties are formally in default, and sold to the highest bidder at an auction. Buyers need to be at the auction, in person, and be ready to pay the price in full, in cash.

Foreclosure auctions can offer significant savings as well as immediate property ownership. Unless the buyer is already familiar with a particular property, there is usually little time to examine it, therefore, the prospective buyer should know the market in the region or the city upfront. Also not to forget that the buyer will be competing against professional investors and sometimes even the lender at the auction.

More about foreclosures can be found in my previous blogs:

Avoid Foreclosure!!! , and,  Foreclosures: Bad for owners but a bargain for investors.

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