Foreclosure properties have always enjoyed a steady run in the real estate race but as of lately, foreclosure investments and auctions have been grabbing a lot of eyeballs and their fair share of attention. A property gets assigned Foreclosure status when the owner of the property has missed more than the threshold limit of mortgage payment and has run into a loan default. The bank or the lender then steps in and then holds an open and an invite-only auction to sell off the property. Foreclosure properties may vary from residential homes to commercial shops to ranch estates to even a storage facility.
The Foreclosure Auction
The bank holds an auction to recover their money from the sale of the foreclosure property. The buyers interested outbid each other and the property is sold off to the highest bidder. The bid usually opens with the minimum amount that the bank would like to recover on the property. The bidding procedure might vary state to state but the core auction process, more or less, is standard. The amount of bid to be paid immediately as down payment is conveyed to the bidders in advance. Since this process is transparent with no legal pitfalls, many see this as a safe investment and a profitable one too. These foreclosure properties are rated around 20-30% cheaper than their current market price and ready for occupancy.
Multi-Purpose Investment
Once a buyer buys a good foreclosure property, he has complete ownership rights over it. He can immediately make it his home, rent it out to potential temporary residents, convert it into an office space or treat it as a holiday retreat or a recreational abode. He has the privilege to sell it immediately or soon at its full market value or an appreciated version of it. The buyer can also consider renting out the property for a few months to recover a share of his cost price quickly. Since the buyer acquired this property for less than the actual evaluated price, any surplus earned can only be labeled as profit.
Overhead Charges
The new property bought may not be completely devoid of any repair or maintenance charges. The buyer may have to renovate the place to his own taste, in case he plans to convert it into his residence or spruce up a whitewash effect, in case he has plans to rent it out or sell it. It would be in the buyer’s best interest to consider all post sale expenditures and find a low-rate maintenance plan.
Expert Testimony
The buyer, of course, has the final word when it comes to his own investment decision. However, sometimes it is wise to take a second opinion from an expert. An expert is an expert on a particular subject for a reason. A foreclosure expert may introduce the buyer to terms specific to the pre-sale and post-sale of foreclosure properties which helps the buyer to get all his bases covered and the sale is a smooth transition and is legally hassle-free. According to Jeff Adams, the foreclosure terms to acknowledge would be:
- Notice of Default (NOD): It marks the beginning of the default of the owner’s loan
- Notice of Trustee‘s Sale (NOT): It specifies the date of the sale via auction or otherwise, which the bank or the lender decides, post the final deadline for the payment of default mortgage.
- Real Estate Owned(REO) : It states the invoking of ownership rights of the owner and the bank or the lender claiming rights over the property .This usually happens no sooner than 90 days from the NOD. It is generally followed by the sale.
The expert may also provide the buyer an insight into the factors of owning a pre-owned house and the opening bid estimate for the property chosen. The expert may also estimate the location worth in terms of facilities so that the buyer can make an informed decision. It may be a sensible move on the part of the buyer to involve an expert’s mandate, especially if it’s his first time into a foreclosure investment
Recognize a genuine foreclosure Deal
The buyer may keep a lookout for an open house or an open auction of a bank or lender tagged property in leading dailies or a local Housekeeping magazine. The buyer can also ask references from people who have closed deals with the bank involved in the foreclosure sale. If it is probable and within amicable means, the buyer can consider a casual chat with the previous owner to analyze the complete net worth of the property and be aware of any constrictions. Any level of preparedness can only be beneficiary to the buyer.
A going once-going twice –sold bid on a sound foreclosure property and a solid investment can reap dual benefits. It can be a part of a person’s long term investment portfolio or bring him a quick short-term gain.
