Houses are one of the most popular types of real estate investments. Even when the real estate market is in a slump, housing prices eventually turn upward and create a profit for the homeowner or investor.
In today’s market, millions of houses have fallen into foreclosure. A vast majority are priced under market value. In fact, experts report housing prices have decreased nearly ten percent nationwide. Many U.S. cities have reported housing prices have plummeted by nearly twenty percent. Add in the vast number of foreclosure houses and it is easy to see a very bleak real estate market.
In reality, the abundance of foreclosure houses combined with low-interest mortgage loans and decreased market value has created a buyer’s market. Many investors and first-time home buyers are seizing the opportunity to invest in distressed properties such as foreclosure and real estate owned (REO) houses.
Purchasing foreclosure houses can be a rewarding and profitable experience. However, distressed properties usually come with their fair share of headaches and challenges. The majority of foreclosure and REO houses require considerable repairs or renovations. Some have sat vacant for several years and been subjected to neglect or vandalism. Unless you plan on keeping the property for a minimum of five to ten years, or are a professional house-flipper, investing in foreclosure houses might not be the best strategy at this time.
Prior to investing in foreclosure houses, real estate experts advise buyers to conduct market research. Comparable pricing of houses sold in the area within the past six months can be obtained via the Internet or through a Realtor. The goal of investing in foreclosure houses is to purchase them significantly below market value. If this cannot be accomplished, it’s probably best to pass on the deal. Once you locate property of interest it is recommended to obtain a professional inspection and appraisal.
Bank foreclosures are usually a less risky investment option. When houses are not sold through auction they are returned to the bank. Oftentimes, houses offered through foreclosure auctions have creditor and tax liens attached to them. When the bank retains ownership of these properties, the liens are removed and the house is given a clean title.
In some instances, the bank makes repairs and prepares foreclosure houses for sale. These expenses are added into the sale price and are usually priced higher than houses sold through auction. However, investing in bank-owned foreclosures is generally less stressful than investing in foreclosure houses sold through auction because all the legal aspects have already been taken care of by the bank.
The majority of bank owned foreclosure houses are sold “as-is” and repair costs are left to the buyer. In order to obtain the best deal, you’ll need to visit REO properties and assess condition of the property.
Although REO houses typically have a higher price tag than foreclosures sold through auction, they are generally a better deal and can save you a tremendous amount of time. With bank owned properties you won’t have to waste time or money removing liens. Nor, will you encounter the possibility of having to evict the previous homeowner, which is sometimes associated with foreclosures sold through auction.
Investing in houses in today’s shaky real estate market can be risky, but it can also lead to massive profits in the long-term. By investing in foreclosures today, you can take advantage of reduced prices and interest rates. Not to mention there are plenty of houses to choose from. If you decide to wait until the market rebounds, the deals won’t be as lucrative.
Only you can decide if investing in foreclosure houses is the best option for you. Take time to engage in due diligence and conduct market analysis to determine if you are truly getting a good deal. Seriously consider the investment opportunity when houses are priced 20- to 30-percent under market value.