The housing market slump has not been kind to existing homeowners who are increasingly finding themselves having to put their homes up for foreclosure. According to Foreclosures.com the current number of foreclosures reached a staggering 250,000+ in August. This may be distressing to homeowners grappling with loan payments but it does work in favor of investors on the prowl for new opportunities. Let's address some questions you might have.
How are REOs and foreclosures different? With REO (real estate owned) properties you're circumventing the complexities associated with foreclosures (i.e.: cutthroat auctions, not being able to see what you're buying). The chances of seeing the property are also likelier with an REO and you also get title insurance policy, decreasing the chances of unexpected liens. Unless you're ready to contend with the investment heavyweights, consider REO.
How do I get started? It all depends on how you want to go about it. You can contact a lender and ask them directly or speak to a knowledgeable realtor who knows about foreclosures in whatever area you're interested in. Or you can browse the MLS to see what's available.
What's considered a fair deal? Lenders certainly want to make a profit but if you're willing to negotiate, you can convince them to sell you that property at a reasonable dollar loss. Remember that the original buyer likely purchased the property expecting it to increase in value which means you're getting a great deal on that $50,000 investment that would originally cost over $100,000. Just keep in mind this warning: foreclosures happen when homeowners can't make payment which means there's a slight chance the property itself is not in the most optimum of living conditions. The last thing you want is to find yourself having to make several pricey repairs that make the foreclosure price obsolete.
Can I use credit instead of cash? It's possible, but you'll have to go through third parties to do it since foreclosures cannot be insured and they usually need repairs. You can also explore getting a home equity loan or consulting a private investor as alternatives.
Is the future still bright for foreclosures? Believe it or not, if the market continues its downward turn then the opportunities are better than ever. Lenders may be struggling with the surplus but that only means you'll be able to negotiate better prices. Putting aside its current state, real estate is still among the most valuable investments in the country.