Buying Foreclosed Houses Not Easy Game

Posted in Foreclosed House, January 8th, 2008 |

There are some prize pieces to be picked up in the foreclosure market but it is not as easy as it sounds. The media gives out the feeling that it is all smooth sailing. But reality is far from it.
Not all the houses listed for foreclosure auction finally slips out of the hands of the owner. The latter will find tooth and nail to keep his hard earned gains. At the last minute they come up with some solution and snatches the house from the jaws of death.

Sometimes these foreclosed victims contact a real estate agent to recover as much of the equity as possible before surrendering it to foreclosure auction.

There are some who will offer the house for peanuts but generally these houses are not worth a dime. It is not because the buildings are dilapidated or the neighbourhood raises questions but because the property is riddled with multiple debts. The debts on a house valued at $375,000 may run up to $450,000. In such a case the house owner would be only too eager to hand over this basket of financial problems. Should anybody but a fool accept this gift?

Once a property is sold at an auction, automatically the past liens are wiped off. In that case picking up a $450,000 house for $350,000 sounds good but instant cash has to be produced then and there to clinch the deal. It leaves little time to apply for a mortgage loan.
Undoubtedly all this procedure cuts out competition. This is why a foreclosure auction is happy hunting ground for professional investors whose pockets are bulging with cash.

There is a three-month gap between foreclosure and auction but the bargains to be had during this time are not many. It needs a lot of calculation and peeping into the future. Buying 30% to 40% below the market value leaves little scope for turning over quick profits considering the trend of the market. One must persevere and afford the time. Those aiming to convert the house into rentals might decide to go 10% to 20% below the market price. The successful investors are full timers. These deals cannot be made viable giving spare time attention.
It is fair game for those who want to set up a home in these houses. For them 10% below the market line is a bargain.