How to buy a foreclosure property?


It is important to know the steps on how to buy a foreclosure property. Although substantial profit can be made buying foreclosure properties, there are also certain risks associated with this process.

How to buy a foreclosure property?

You need to check public records on the properties you are interested in for pre-foreclosure and liens information. There are different stages during which you could buy a foreclosure property:

  1. At pre-foreclosure:

    At the pre-foreclosure stage, you get the chance to work with the borrower and lender and create a win-win situation for everybody. The lender will avoid foreclosure expenses, the borrower will have a sale, and you are getting the property with significant discount amounting to up to 30%. However, finding properties in pre-foreclosure may be time-consuming, and you may have to either negotiate with subordinate lien holders, or may have other homebuyers to compete with.

  2. At the foreclosure sale:

    At the foreclosure sale, you can gain the greatest discount - up to 40% off the market value, but you have to be really quick. Again, you will be competing against other buyers at the auction. It is strongly recommended that you research the title of the property prior to getting into the auction. Also, foreclosure sales can often be put off and may be wasting your time, but they will also provide for the higher investment return.

  3. After the foreclosure:

    You could also buy the property from the lender who got it after the foreclosure; that is, buy an REO (real estate owned) property. Lender will have paid taxes, paid for repairs and other liens on the property will be cleared. At the same time, the lender does not want it as he or she is not in the real estate business. This is the safest and least time and effort consuming way to buy a foreclosure property. However, the discount you could get can be as little as 5%.

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