You see people buying foreclosures and flipping homes on television and you wonder if buying foreclosures is right for you. Buying foreclosures can be a gold mine, or a disaster. This article will explain the different types of foreclosures and which ones are right for the beginning real estate investor and the first time home buyer.
Pre-Foreclosures are not easy to find but the rewards are can be terrific. A pre-foreclosure is a home that is in the beginning of the foreclosure process. This category also includes people that are about to be foreclosed on. Reasons for foreclosure are divorce, death in the family, loss of job or can't go to work, or one of many other hardships. Most of the people in pre-foreclosure want to save their credit so they are willing to sell their home fast and for a low price. You can buy a list of homes that are in the pre-foreclosure stage and send them a letter stating you would like to buy their home. Keep in mind these people are desperate to sell their home and hopefully get something out of the deal. You are in the driver seat but don’t take advantage of these people. Try to make the deal a win-win situation for everyone. This type of foreclosure is best for beginning investors.
Foreclosures at the court house steps are extremely difficult and are full of traps. This type of foreclosure is best left to the professional real estate investors. Although an investor can make a lot of money with foreclosures, the risks are high and I don't recommend this type of foreclosure.
REO homes are great for beginning real estate investors and first time home buyers. An REO is a home that has already been foreclosed. No one bought the home at the court house steps, so the bank or mortgage company takes the home back. The bank will then ask a realtor to sell the home for them. These homes are sold at a five to ten percent discount from retail. These homes sometimes need a good cleaning, paint and carpet. This is an excellent first time real estate investment or home. There are a few risks with buying a REO but getting a home inspection will lower those risks.
Buying foreclosures can be lucrative and dangerous. Make sure you start with the easiest variety, REO, and get instant equity. Make sure you know the value of the home before you buy. Just because it is a foreclosure doesn't mean it is a good deal.
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