Bank Foreclosures a Profitable Investment?
Bank Foreclosure Investing
Several people, especially those new to real estate investing,
will prefer bank foreclosure to any other form of property
buying because they think that they are safe properties to buy.
Their understanding is that the bank owns the property and
therefore they are free from all liabilities and other negative
encumbrances. Though a bank foreclosure can be safe, the bank
never owns the property. The property has only been pledged as
collateral, meaning in the event of default of loan payment, the
property should be disposed to redeem the loan.
Bank foreclosure property many not be cheap
Many people also believe that bank foreclosure is cheap, no
matter what. It is held that the bank must sell the property the
same amount it cost so such prices are not highly marked. Many
people who hold this idea may be in for disappointment because
if the lender becomes the successful bidder at this auction,
then the propeerty can be sold at any price. The bank also wants
profit it needs to stay in business by operating at great
profits.
Nevertheless, buying bank foreclosure still remains the popular
way method of buying property. The process is fairly easy and a
lot of risks associated with other forms of purchase are either
eliminated or reduced in the bank foreclosure.
How to assess properties for sale
To buy bank foreclosure, scout for announcements or notices in
the newspapers or from the courts. You can also contact a real
estate agent for such notices or use a listing service. In your
search, you have to be guided by a set of criteria to get the
best deals. To make a great investment, you will have to
determine your own investment policies and get properties that
are close to you. You should also be mindful of the price. Are
they reasonable? Look at the architectural design. Will it be a
good sale if you intend to resell it? If you intend to occupy
the place yourself, consider the neighborhood. Is it a
well-developed area with full services? Has it got enough rooms
for you and your kids?
Summary
For the real estate investor or home buyer, foreclosures are an
opportunity to acquire property that can serve as a investment
or as a primary residence.
Acquiring foreclosures after the sale, whether from an auction,
or from the bank or other lending institution (referred to as
REOs or real estate owned) is essentially the same as buying
from any other seller in a normal transaction. Therefore, it's
in best interest to understand and educate yourself in
foreclosure process if you choose to pursue these opportunities.