Is Foreclosure Investing Right For You?

Investing in property foreclosures can be immensely rewarding, but it's not for everyone. I know from personal experience and from observing the results of many other investors that it is an extremely lucrative niche of real estate, but that doesn't mean it is up your investment alley. Let's take a look at some of the factors to consider before deciding whether or not to get involved in buying foreclosed properties.

To start with, foreclosure investing is heavily impacted by the law. Each state has different laws which govern various aspects of the foreclosure process. That being so, you need to spend some time studying and becoming familiar with the legal process that applies where you wish to invest. Some ways to find out about this information in the shortest amount of time is to join your real estate club and talk to other knowledgeable and experienced foreclosure investors, visit the city courthouse and find someone who has worked there for many years and knowledgeable about the process or consult with a realtor such as an REO agent who can help guide you.

If the idea of learning these laws and legal process doesn't appeal, foreclosure investing may not be for you. On the other hand, once you understand the relevant laws, they typically become second nature for most foreclosure investors.

Your learning curve will also include acquiring a thorough understanding of the steps involved in foreclosure proceedings and some of the key considerations when buying a foreclosed home.

Some of these considerations relate to your rights and responsibilities when offering to buy, or buying a foreclosed home. For example, if you buy a foreclosure at a public auction or trustee sale (based on which applies in your state), are you required to buy the property "as is"? Are you able to inspect the property before you bid for it? Can you back out of the deal after you buy it?

Foreclosure investing also requires you to be good at valuing properties. How confident are you in valuing property in your preferred area... and assessing the budget required to make any necessary improvements to bring it up to the price you want to sell it for?

Perhaps more than in any other area of real estate, you need to get your valuation right before buying a foreclosure. Many foreclosed properties are in dire need of repair, and carry unpaid liens and property taxes. You need to be sure that your valuation of the property is correct and, depending on your monetization strategy (whether it's flipping... fixing up the property to sell or rent... or some other strategy) you have accounted for the additional expenses required to improve the home and/or settle any liabilities. At the same time, you don't want to overcapitalize the property by spending more on improvements than is justified by the resulting increase in value (if any).

A final consideration is your negotiation skills.

Good negotiation skills are necessary for buying any kind of real estate, but when it comes to buying foreclosures you are dealing with three very different kinds of negotiations. First, there is negotiating with the home owner who needs to be convinced that selling their home to you during the pre-foreclosure stage is their best option... then there is the public auction or trustee sale... and finally there's negotiating with the bank or other lender if the property is not sold at the auction or trustee sale and is bought by the bank/lender.

Before embarking on foreclosure investing, consider these factors. Get educated by studying the wealth of information in ForeclosuresUnleashed.com or other good foreclosure resources. That way you'll be prepared for the challenges - and the opportunities - involved.

ABOUT THE AUTHOR

Whether we like it or not, foreclosures are right here and abundant among us. BUT, are YOU right for foreclosures? To be or not to be involved in foreclosures, that is the question.