FORECLOSURES FEAR LOOMING LARGE

Posted in Foreclosure, May 23rd, 2007 |

Novices beware of the temptations of jumping into the foreclosure business. There are many hidden catches. Risks are enormous. Opinion is that with a large number of foreclosures in the horizon the temptation is very great to rush into these but invariably the novice gets his fingers burnt.

Reports say that in April 147,708 foreclosures had been filed – the rate being one foreclosure for every 783 US households. It is up by 62% since the last year. Time and experience are the two things required to enter this market, which is the happy hunting ground of real estate professionals for whom this is a full time job. It is not for greenhorns.

Buying foreclosures requires a lot of homework. The risk factor is very high. At the last minute the buyer might seek bankruptcy protection and the auction gets temporarily suspended. Even if the sale proceeds, you might not be the successful bidder.

To venture into this world it is wise to take assistance of real estate professionals well conversant with local laws.

Those aspiring to enter this zone should themselves be solid property owners and not up to their necks in debts. Then only will they be able to take some risk involving diversion of their investments from one basket to another. A foreclosure is all about timing.

The preforeclosure is the stage when the owner goes into default by missing either one or more payment. This is the best time to buy by comparing markets, researching the title and inspecting the homes. At this point the seller will be most accommodating. It is better to include repair costs and also real estate agency fees. Houses that have been lived in for a minimum of two years will be in better condition.

After this the property is up for auction. It attracts hardcore investors. Things now can get nasty with the problem of evicting residents. They get time to strip it, out of a feeling of frustration and petty gains.

Banks do not always price the property fairly. Just because the bank owns it do not expect a bargain.

The exit strategy is very important. Why are you investing? To live, to rent or to resell? Rates might always fall. Be alert.
You will have to know every aspect of investing – contracts, finance, negotiations, acquirements, rehabilitation and distribution. Foreclosure is not a game for novices.

Via