Foreclosed homes: the homebuyers' milk-and-honey land
By Ken Wilson
What is the first image crossing your mind when you hear someone talk about foreclosed homes? Well, most naturally, you picture houses bought on a bargain basis. These are homes the loans on which the former homeowners were no longer able to pay back. Subsequently, they come at distressed values, a situation which couldn't be more convenient for the financial possibilities of an eager homebuyer/investor. Though the real estate market looks pretty hot, foreclosed homes are often a favorite pick because they will generally cost less than houses sold at their real market value. However, don't start picturing 50% decreases in the price ranges, because this will very rarely – if ever – happen. Foreclosures or not, the real estate market remains rather steady on its inflamed positions.
Subsequently, do keep in mind that foreclosed homes are an opportunity of purchasing a house at a discount; on the other hand, temper your imagination as to just how big this discount may be: it could reach 50% of the house's real market value, but on rare occasions. Most often you will obtain 15%-25% lower prices. However, if you are swift and act in due time you could take advantage of pre-foreclosures, houses which could be sold, with a profit for the buyer, before entering the foreclosure stage. Finding out about pre-foreclosures in due time is indeed a matter of skill and of reliable sources of listings.
As you know, the number one proved fact about foreclosed homes and pre-foreclosures is that they truly tend to sell like hot cakes. So what you need to do in this case is to act as quickly as possible. Truth be told, there's very little time to act, particularly with pre-foreclosures. If the investigations which are necessary prior to the actual purchase might take a rather extended time interval, when the time has finally come to purchase you need to move straight toward your target without unnecessary delay.
Under the pressure of such circumstances, you will surely wonder about the best possible manners to study the foreclosed homes market and, subsequently, to act on time. One of the first things you can do is to place a limit to the area of your concern. In other words, look for pre-foreclosures in pre-determined areas. Don't start without a well-designed plan; geography is significant in this case; this means you won't go looking for house bargain opportunities chaotically, throughout the nation. Surely you must have a preferred area where you want to locate your future home or to develop further investment opportunities. Moreover, a restrained geographic area will give you the chance to get well-accustomed to its real estate values and trends. In this manner, you will be able, after a while, to appreciate which transactions could turn out advantageous.
In addition, don't just jump at a pre-foreclosure occasion. The sellers might be unfavorably impressed by a decision on the spot, with no prior investigation of the house or some time spent to negotiate; even more, they might be in quite some psychological distress; you can imagine that there is no pleasure in practically being compelled to place your house on a discount market. And both foreclosed homes and pre-foreclosures are circumscribed to such a market. Moreover, consider the fact that the selling entity – be it the homeowner himself, in the case of pre-foreclosures, or the bank, when the house has already been registered as a foreclosure – is in hurry of completing the transaction. The homeowner hopes for a better result, one that could obtain a higher selling price for his house, so he needs to find a buyer before his house enters the foreclosure stage. The bank, on the other hand, gains nothing if the foreclosed property stays idle: there's no profit gained out of it.
In any case, the idea is that you cannot buy without some previous examination of the market and then of the properties you have set your eye on. The condition of any foreclosed property needs to be evaluated (one remark here: in auction circumstances there will always be an information packet on the condition of the property, in the case where there was no time to check it on your own) so that you should make a profitable investment. Surely you do not want to pay for repairs subsequent to your purchase the sum which would complete and even overwhelm the real market value of a distressed house. In the end, foreclosed homes and pre-foreclosures make a good buy if you take the time to check the real estate market and then possess the determination and skill to act at the right moment. If you really think about, no good thing is obtained without some prior effort.
About the Author
Pre-foreclosures and foreclosed homes are probably the single opportunity of purchasing real estate properties at prices below the real market value. However, there is always room for caution and patience even on such favorable occasions. Real estate investment is profitable if developing on the domain of the skillful investor.
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| Some other articles by Ken Wilson|