Buying a Foreclosure – Grab a Deal of
a Lifetime Before The Market Corrects Itself

Buying a Foreclosure Is One Way To Get a Hot Deal
The housing market has been flooded with a wave of foreclosed properties and they continue to come by the thousands. With each additional home entering into the picture a domino effect takes place; families are displaced, property values drop and local governments are forced to deal with the reverberating impact of a lower tax base. In the midst of all this negative news is a bright and shinning light! Buying a foreclosure is the way to grab the deal of a lifetime!

Buying a foreclosure has presented potential homeowners and investors with literally “Once in a lifetime” opportunities! In many scenarios, they are buying up these properties at ultra-low prices. I’m talking about experiencing discounts ranging from fifty percent to eighty percent below fair market value.

Currently, it’s anyone's guess when the housing market will turn around. Some financial analysts are saying the forth quarter of 2009. While others are saying, we might start to see a turn around towards the end of 2010.

Predictions aside, the time to buy is NOW! This is probably the best you are going to see in terms of a buyer’s market in a L-O-N-G time. Due to the glut of properties on the market, the deals are everywhere. It’s very few real estate spots not affected by this downturn. Whether you are an investor or simply someone seeking a home to live in, buying a foreclosure is the way to go, RIGHT NOW! Six months from today, that might be a different story, but right now, the price is right.

There are essentially four ways of buying a foreclosure; each one has its on quirks but once you learn them, you’ll be on your way to finding an awesome deal.

Pre Foreclosure
This means you would most likely be dealing with the homeowner unless they’ve enlisted the help of a real estate agent. If you choose this route, you need to be ready to understand the financials. Meaning, the homeowner is behind on their mortgage, foreclosure is eminent and time is of the essence. You will need to know how to look at the numbers and spot a deal worth working for. Or, as Kenny Rogers sings in the Gambler, “You got to know when to hold em, know when to fold em, Know when to walk away and know when to run…”

Short Sale
At this stage, the homeowner is just steps away from foreclosure and they’ve probably looked at other possibilities such as: loan modification and bankruptcy and have exhausted their options. The “Loss Mitigation” department from the bank will analyze each situation case-by-case to determine if a Short Sale is less expensive than foreclosing. If it is, they will take the Short Sale route. Amazingly, in this current market, you can pick up some phenomenal deals by buying a foreclosure going this route.

Auction
At this stage the homeowner has not found a remedy and the lender has opted to exercise their legal rights to repossess the property. Part of that process is going through an auction. Buying a foreclosure at an auction is not for the faint of heart or rookie.

It is for the person who has done their market analysis homework and is prepared to essentially buy a property sight unseen. After successfully bidding, the new owner may be faced with evicting the previous homeowner and repairing a potentially trashed property. But don’t let that negative throw you off, there’s gold in auctioned properties for the buyer and investor that has prepared themselves.

Bank REO - Real Estate Owned
If there was no successful bidder at the auction, the bank will end up repossessing the property and taking ownership. The property is then transferred to the Bank’s REO Real Estate Owned Department. Once there, they will prep the property and put it up for sale. You can grab great deals because banks have a glut of these properties and if they sit on them until the market corrects itself, THEY WILL GO BROKE!

Actually, they will face being shut down by the FDIC due to having more debts than assets. When you buy a REO Property, all of the lien issues have been resolved and typically the bank has brought the property up to move-in condition. Of the four options, buying a foreclosure at this stage carries less work.

As it stands, buying a foreclosure is probably one of the best ways to buy a home and acquire investment properties and will be for the foreseeable future. If you do your homework and negotiate for the best deal possible, you can easily end up buying at fifty to eighty percent below Fair Market Value and that’s after you spend money to bring the place up to move-in condition.

Author, Joel Marks of REODr.com