Foreclosed homes are properties that went into a lawful procedure that allows a lender/bank to trade or have ownership of these homes due to the non-payment of a loan that is secured by that holding.
Are Foreclosed Homes Worth Investing in?
Investing in foreclosed homes can be a great way to build wealth. Buyers purchase them for a variety of reasons:
- Flipping - when a buyer purchases a home, does renovations or clean-up and then resells it for a profit, it is called flipping. Many flippers purchase foreclosed homes and then make a profit when reselling them.
- Renting - when a buyer purchases a foreclosure, does renovations or clean-up and then rents the home in order to have an ongoing income.
- Occupying - when a buyer purchases a foreclosure and makes it a primary residence. Since foreclosures are so affordable, they are especially popular with first time home buyers.
- Buying multiple properties - investors often find great deals on foreclosure properties. It is possible to buy multiple properties and renovate them for either resale or rental.
- Buying commercial properties - buying and developing foreclosed commercial properties can also provide an ongoing income.
Advantages of foreclosure investing
Price reduced - One of the main advantages of foreclosure investing is the dramatic savings on a property. Foreclosed homes are usually priced to sell so that the lender can recoup their costs. The advantage for buyers is that you can find a great home in your desired area for a reduced cost.
Investing potential - The second major advantage of foreclosure investing is that you can easily build wealth buying this type of real estate. Making minor improvements and then flipping or renting the property provides an opportunity for investors an ongoing source of income and a great rate of return on investment. Flipping, renting or starting a business in a foreclosed commercial property are all ways to
How to Buy a Foreclosed Home
Buying a foreclosed home isn’t much different than buying any other property.
- Consider what area you are interested in. Finding the right location is key for the long term success of your investment in the property. It doesn’t matter if you are planning to resell or live in the property, the right location is the first step to success.
- Search for foreclosure listings either online or through a real estate agent. Finding a real estate agent who is familiar with foreclosure properties and the process is a great way to start your search.
- Reach out to your lender and find out how much home you can afford, or save funds for a down payment or to buy a property with cash.
- Identify a property. Once you find the right property, your real estate agent can help you make the offer.
Making an offer on a foreclosure property and receiving a response can take some time. Often, banks have many properties listed and a backlog of offers to process. Be patient and negotiate with the seller if they don’t accept your first offer.
The great news is, if the lender accepts your offer, you can close on your property and begin transforming it for flipping, rental or move in!
Types of Foreclosed Homes Available for Sale
If you’re interested in buying foreclosed homes, there is a variety of houses available for sale, including mobile homes, condominiums and town house foreclosures.
No matter what type of property you are interested in, be sure to have the title checked to ensure there are no liens against the property. If the previous owner has not paid their taxes or had a second mortgage, the home may have a lien that needs to be cleared before you take ownership.