Real Estate Investing: Different Stages of a Foreclosure
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Real estate investments come not only with offers but also with timings. Gaining an intellect on what market you should opt for your investments, which sub-category would serve right for you to specialize in, and what would be that optimum time for a buy to can play a lead role in increasing the potentiality of your investments thereby, cutting down the relative risk.
For the starters in the real estate market foreclosures serve as an optimal option for earning instant equity in real estate. The term foreclosure encompasses a range of sub-groups to be opted for. The 3 basic subgroups that have to be recognized under the category of foreclosures, the first one encourage the investors to buy the property before the event of foreclosure auction. The second subgroup involves purchase of properties at the auction. The third and final group deals with the buy-offs done after the auction is over, mainly offered by the related bank or an auction company.
Buying a property before the auction comes with the risk of an unconfirmed foreclosure to the buyer. This area comprises of properties listed in the multiple listing service (mls), short sales, notice of defaults (NOD’S) and notice of trustee’s sales (NOTS). Selling agents cannot compete against other foreclosures in the neighborhood unless they come up with a foreclosure for the sale of their home. This gives meaning to the fact that the investors do not have an option of purchasing a home, at this level of the foreclosure.
A primary end section owned by the first subgroup of ‘Short Sale’ permits the owner to deal with the buyer, negotiate with the bank and buy the home for a lesser value when compared to the loan amount owed on the home. Though, short sales are may take too much of time for completion , approx.4-6 months , at times due to the short-staffed banks unable to manage the large volumes of short sales
The second subgroup involves the purchase of a property directly at the auction. In few states there are judicial proceedings that follow unlike the foreclosures of California and Nevada that are directed on the courthouse steps. There is a positive aspect of belonging to this group, the competition is not all that tough, all you require at that point of time is cash that is equivalent to or more than the final figure of the bid in order to become the winning bidder. Most of the buyers are returning their properties back to the banks for turning into bank owned REO’s.
Last but definitely not the least third and final subgroup can serve as the most profitable way to buying a foreclosed property, with most of them being bank owned properties (REO’s) after the auction is over.
Banks have been planning lately cutting down the prices of foreclosed properties. Real estate markets of Southern California, Las Vegas, Phoenix, and Florida have witnessed a drop of 50% of price highs in the last 2 years. Purchasing a bank owned property is can be considered as a much less riskier option buying a property at some auction sale. Also the procedure is speedier than that of an auction with the negotiations getting over within a week. Home inspection of bank owned properties is much easier as they are vacant most of the time. As an investor I would inspire all my clients to opt for a detailed home inspection of the property they are expecting to buy.
I would prefer advising my clients to take advantage of all the current and genuine foreclosure dealings. As an investor of the Las Vegas real estate market I have witnessed both the ups and downs of the markets from 2004-2007 due to the frequent foreclosure dealings held in Las Vegas.
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