There are many things that you can do to make yourself a smart real estate investor, and give yourself a jump on the competition. If you don’t know a piece of property is going to go on the market in the future then there is no way that you are going to get the listing.
For the smart real estate investor, there are many opportunities for making large amounts of money in foreclosures. Our country is now in a recession that is causing a record number of real estate foreclosures.
Foreclosure investing is a specialty all to itself within the world of real estate investing. Since this highly targeted and specific market is dominated by competing investors it is vital that you become educated in all the different ways money can be extracted and earned so that you can dominate your competition in finding the best deals first.
For a majority of people, the conventional way to buy property is to go to the bank and ask for a loan. If and when the bank agrees to lend you money to purchase property, you then sign a mortgage that contains a promissory note. The purpose of this promissory note is to insure that if you don’t pay back the money that they loaned to you, then they can take back the collateral, which is your house.
The number one reason for foreclosure is divorce. The main reason is, that before the divorce, there are two people contributing to the house payment and after there is not. The smart real estate investor knows this, so to get a jump on his competitors, he develops a source that lets him know about recent divorces. He now can contact the people directly and possibly work something out with them directly.
Other things that cause people to stop making their mortgage payments include heavy credit card debt, unemployment, job transfer that involves re-locating, serious illness and death.
Pre-foreclosure is the first step in the foreclosure process. This usually happens when the bank starts to get nervous because the homeowner has fallen behind in their payments. The bank will send the homeowner a certified letter that states if the homeowner does not bring their payments up to date, then a sheriff will show up at the house to evict the inhabitants. The bank really does not want your house but they will take it if they have to. This is a great opportunity for the smart real estate investor, because during foreclosure the investor has little risk, no liability and many times no requirement for money or credit.
The Biggest Risk
The biggest risk when working the pre-foreclosure market is associated with what mortgages, liens and judgments are coming with the property that the smart real estate investor is purchasing. This risk can easily be overcome with a little research on the part of the buyer. Just remember that liens, loans and judgments are public record and recorded at the county courthouse. It is a very good idea to hire an attorney to do a preliminary title search for you because they are very familiar with the process.
Auction By Trustee
These auctions are usually held at the county courthouse, and give the bank an opportunity to sell the house, even at a big discount, rather than continue to own it. Since these properties are sold as is, the smart real estate investor always makes a detailed inspection of the property before they bid on it. The third and final stage of foreclosure happens when no one purchases the property at auction, forcing the bank to buy the property back itself.