With more than one million homes in the United States in some form of foreclosure, opportunities for investment abound. If a house is in any form of foreclosure it simply means that ownership of the property is on its way back to the bank and it has no bearing on the house as a potential investment. The foreclosure process involves four stages. The first stage begins with the owner’s first missed mortgage payment which triggers a notice of default. Next, there is a four to six month foreclosure auction stage during which the property is auctioned to the public and goes to the highest bidder.
After this is the redemption stage during which borrower has an opportunity to pay off the balance of the mortgage and get the property out of foreclosure. Finally there is the bank-owned stage in which the property goes back to the lender who can then sell it to another buyer. During each of these stages there is an opportunity for an investor to purchase the property at a significant discount.
This is a tremendous opportunity to purchase real estate and save a great deal of money but there are things that should be kept in mind. The first thing is the most basic and that is that no matter how good the deal is, it is still an investment and as with any investment there is risk involved. Also, it is critical to know the costs that are associated with owning the particular property such as repair costs, maintenance, and so on. And one of the most important things to remember is to do your own research on the property and be thorough. Never take the broker or seller’s word for the condition of the property or whether the title is clear or not. Being a smart investor means doing your homework and if you do, someone else’s foreclosure could actually be a good thing for your portfolio.
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