Foreclosures are the perfect investment choice for investors because they are sold at discounted prices. You are getting a property with built-in equity. Foreclosures can be purchased at foreclosure auctions or by purchasing REO’s (bank-owned real estate). Short sales are preforeclosures and have not gone through the foreclosure process. They are still owned by their current owners who are in default or about to default. The seller must obtain approval from his or her lender to sell the home for less than he or she owes on the mortgage. Short sales are also good investments because they are sold at discounted prices. However, there is no guarantee that your offer will be accepted by the seller’s lender, and the closing date cannot be determined until the seller’s lender approves the sale. If you don’t have time to wait, foreclosure auction properties and REO’s are better choices.

Buying at Foreclosure Auctions

Foreclosure auctions are open to the general public. The highest bidder is awarded the property for cash and given a deed that must be recorded with the county recorder’s office. Each state conducts its foreclosure sales differently. In some states, foreclosures are conducted by the Sheriff at the county courthouse. Other sales are conducted by private trustee sales or auction companies at the property. You can buy foreclosures at online auctions, too. Some states allow the former owner to redeem the property after the sale pursuant to statutory redemption laws. You should always check the foreclosure laws of the state in which you are buying property. To find out about public foreclosure auctions, you can check the local newspaper. Also notices are posted at the private and at the county courthouse. Information is also available from many sources online.

Due Diligence

Before you decide to bid at a foreclosure auction, check the recent comparable sold properties in the area in which the home is located to make sure you are not overpaying for the property. You will want to conduct a title search to find out if there are any liens on the property. Title insurance is not available on auction properties. When you buy a foreclosure auction property, you are responsible for paying off liens and evicting former owners or tenants who may still be living at the property. Federal foreclosure laws protect tenants from foreclosure eviction. A tenant who has a lease may remain on the property through the end of the lease term and for an additional 90 days after they receive a notice of eviction. Tenants without leases may only remain 90 days after receiving an eviction notice. If you live in the area, you should drive by the property to see if it is vacant.

Also, be sure to conduct an inspection on the property the day assigned to inspections. The majority of foreclosure properties are not in good condition so you must leave room in your budget for repairs. For those of you who are handy, you can save money by doing some of the work yourself. If you are the successful bidder, you will be given a deed that should be recorded with the county recorder’s office where the property is located.

REO’S

REO’s are foreclosure properties that did not sell at auctions that the lenders bought back and listed with local Realtors