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Investing in Foreclosures – What Is the Best Method?

If you are new to the concept of investing in real estate, you would do well to learn more about investing in foreclosures. Before you get started, however, you need to get a realistic look at what is involved. The first and most important thing you need to know is that foreclosure investing is not for beginners. The profit potential associated with this investment opportunity is huge which is what makes people new to real estate so intrigued by it. If you have a few years of experience in real estate investing, this could be the right time for you to get involved in foreclosure investments.
There are three ways of investing in foreclosures. The first is buying pre-foreclosure. This is when you buy the property from the owner who as defaulted on their loan before it goes into the auction phase. This is a mildly risky option because of the things that can go wrong. The homeowner may disappear after making the deal or in their desperation they may lie about the condition of the property and the neighborhood in which it exists. If you fail to check out unpaid utility bills or property taxes, these become your responsibility once you buy the property.
The next option is to buy at auction. This is the riskiest choice because at the auction, you do not have a real estate agent backing you up. You have no escrow, no title report, and no title insurance. In most cases, the sale must be made entirely with cash and you usually have only a week to a month to raise the funds, all without ever seeing the property first. Sometimes, occupants will vandalize or steal property from the home before they leave in a last-ditch effort to relieve their frustration of being evicted. None of this is in your favor when investing in foreclosures.
The final choice is to buy from the lender after the auction. This is only a possibility when no investors bid in a foreclosure auction. When this is the case, the property falls back into the ownership of the lender. This is safest option of investing in foreclosures. A property at this point is known as repossessed or real estate owned. Many times, you can get the property for less this way because the bank will likely be eager to get the property off their hands. Plus, if anything goes wrong, you can take legal action against the lender instead of chasing a disappeared former tenant.…