Pre-Foreclosure Investing
The advantage to buying a property at a foreclosure auction is that you can often pay far less than you would have under normal circumstances. Frequently you can invest in improvements and then sell the home for a much higher price than your cost.
The disadvantages and risks are more numerous. Simply to participate in the auction you must have sufficient funds available (either cash or a cashier's check) to cover 10% of the purchase price. You also must be able to arrange for financing within thirty days to complete the purchase or you risk losing your deposit. Next, you're buying the property as-is, without inspection. The condition of the interior of the home is usually a complete unknown. You'll have to be sure that the price you pay is low enough that you can still afford to make significant improvements or repairs.
Buying at pre-foreclosure has two main advantages over buying at a foreclosure auction. The homeowner may be desperate and may be willing to do almost anything to avoid actual foreclosure. In addition, you can enter the property to inspect it before purchasing, so you'll know exactly what you're purchasing. For those reasons, pre-foreclosure investing is a wave many real estate investors are now riding
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