Tips on Acquiring A Foreclosure Property

In today’s time and economic climate, purchasing foreclosure property appeals to many potential buyers. The current market trends make it an ideal time for both novice and experienced investors alike to purchase foreclosed properties to use as rental properties or flip down the road.
Foreclosed properties come in all sizes, problems, and shapes, especially amid the Coronavirus (COVID-19) pandemic. Although in some local markets, it’s possible to acquire foreclosed properties for as much as 40% below market price, most foreclosed properties will sell at about 5% to 7% below market value despite the current health pandemic.
When you’re looking into acquiring foreclosed properties, it is essential to conduct thorough due diligence.

The foreclosure process begins when the homeowner falls behind on their monthly mortgage payments. While you may find various foreclosed properties at substantially below market value prices, the various repairs required, and renovations could be much more expensive than what you’re financially prepared to deal with.

After you’ve located a property that you might want to purchase, try to find liens on the property (i.e., real estate tax liens, etc.). In general, these types of liens will probably increase the total price of the property. Of course, you should conduct your due diligence on the market values in that particular market and the current sale prices of other residential or commercial properties in the area.

Once the lending institution decides to foreclose on a property, a notice of nonpayment or Lis pendens is filed in the appropriate jurisdiction. Considering that this filing is a matter of public record, this is how you may begin your search for foreclosed properties. Likewise, you may also use trade magazines and e-newsletters or subscription websites that specialize in assisting buyers in locating and purchasing foreclosed or pre-foreclosure property.

Additionally, several lenders tap the services of real estate brokers and agents to sell foreclosed properties. However, if you are just beginning your career as a real estate investor, you most likely want to try purchasing properties directly from the lenders. Bank-owned homes are considered the safest ventures for unskilled foreclosed property buyers, given that there is no risk, no taxes, no liens, and no tenants that you have to evict.
Lastly, many novice investors are not familiar with “hidden foreclosed properties.” Specifically, these are properties that were in the process of being built when the money ran out for the project. Therefore, the lender that foreclosed on the building and construction loan takes the properties back and tries to sell them with a real estate agent’s assistance. These properties are not referred to as foreclosed to any party involved in the process even though technically, they are. That said, purchasing foreclosed properties is one of the best investment strategies if done correctly.

In general, owning investment property provides useful income tax reductions for investors as the property increases in value and earns income. With lots of other financial investment possibilities, purchasing foreclosed properties might be a good investment strategy for your business. For more information about the process, or to begin your property search, contact us immediately.