Introduction to Investing in Real Estate Foreclosure

Deciding to invest in real estate foreclosure

With the rise in real estate appreciation rates across the United States, a potential foreclosure buyer may want to repair a property to improve its value for living, renting, or reselling. The strategy a buyer follows will determine which foreclosed property to buy and the location.

For example, with media house prices for San Diego, California, topping $ 500K +, a couple may not be in a position to afford a home of their own in San Diego, California. However, you could buy a foreclosed property in another area or state with lower home prices but in a faster growing market or with better potential for future appreciation growth; When the property increases in value within a few years, the sale of the property could provide the necessary capital to buy in the San Diego area.

Locating foreclosed properties

You can find properties in foreclosure by visiting your local registrar’s office and making photocopies, as listings are added on a daily basis this can be overwhelming.

Through the Internet, several websites allow searches by state, county, city, and zip code. All of the sites listed below offer listings for a fee. Take advantage of the free trial period offered to fully evaluate your ads. Sites must offer the most recent listings with daily / monthly updates.

Determination of the valuation of distressed property

Once you’ve identified a property of interest in foreclosure in an area you’ve investigated, determining the value proposition will determine whether or not to proceed. The determination will be influenced by your investment strategy, that is, whether you want to live, rent or resell are factors to consider, as well as the time frame of your investment.

The first step in valuing a foreclosed property is obtaining information about the area. Several websites offer free comparable sales or “add-ons.” This information is of great help in determining the value of the property.

Securing Financing

Due to the rapid window of opportunity that a foreclosure presents, it is important that a potential buyer is prequalified before engaging in a foreclosure investment.

Also, knowing the amount of money available to the investor can be a guide to locating areas within the US that are within investment range.

Being prequalified allows the buyer to be in a financial position to purchase the foreclosed property. Prequalification provides a significant advantage in competitive markets. Once approved, available funding facilitates negotiations.

Find and work with real estate agents

The most important aspect of investing in foreclosure involves finding and working with a real estate agent.

If you are considering foreclosed property outside of the area or out of state, then working with a local agent in that area, who can advise on the condition, learn about growth potential, advise on local conditions, is an important relationship to develop.

Since most real estate agents focus on “traditional” real estate transactions, mentioning “foreclosures” can cause them to refuse to work with a potential investor; Therefore, it is important to educate the agent about the opportunity to work with you.

“Buyer’s Representatives” take into account the interests of the home buyer and are charged with finding the right property and negotiating the best price for their clients. Choosing the right real estate agent will make the buyer’s life much easier. There are agents who specialize in the foreclosure market, with specific experience in REO properties.

Look for an agent with experience in foreclosure transactions, as well as knowledge of local, regional, and state laws. But it is also important to consider the agent’s knowledge of the area; your ability to close a deal; and your access to other professionals (attorneys, lenders, mortgage and title professionals) to ensure the buyer is in good hands.

Make an offer

Once you have determined the property’s valuation, researched the area and growth potential of the appreciation, and established a relationship with a real estate agent, the final step is to bid below market value.

If the property is owned by a bank (REO), you can prepare an offer similar to a typical purchase offer, subject to a full inspection and title search.