In the US, 1 in every 12,488 properties is currently in foreclosure. Over the years, property has proved to be one of the best investments that can be made. The degree of success that someone can have with property investments can vary a lot depending on their investing strategy. There are all kinds of real estate investments that an individual can make, and foreclosed homes are one type that has a lot of potential. So what are foreclosures, and how can you invest in them?
We’ve put together a guide to buying foreclosures to answer these questions for you.
What Does Foreclosure Mean?
When a mortgage lender helps someone to buy a house, they expect regular mortgage payments to pay off the loan. Sometimes, people fail to make these payments, and if this happens, the lender may then seize the property. They can put the property up for sale to help them recover the rest of the loan that they’re owed. Mortgage lenders will typically sell a house in one of two ways: an auction or a direct sale. In some circumstances, the homeowner may sell the property themselves through a short sale.
How to Buy Foreclosures
When buying a house, you have the option to buy a foreclosure. Just bear in mind that the process can be different from a standard house purchase.
If a home has declined in value, the homeowner may need to sell it for less than what they owe on the mortgage. In this case, the homeowner still owns the property, so you’ll purchase it through their Realtor. It’s the lender; however, that will have to approve your offer, and waiting for this can take a long time.
An auction is one of the best ways to get a home for a good price in a short amount of time. This appeals to a lot of people, but it’s a high-risk, high-reward strategy. While you can get a house well below its market value, you won’t be able to inspect or appraise it before purchasing. There may be issues with the house that you only find out about after buying. Many auctions also only accept payments in cash, rather than through a mortgage. For the few that do allow mortgage financing, you’ll need to have pre-approval ready.
From a Lender
Many lenders will have foreclosed homes in their REO (real estate-owned) inventory. You can purchase this way, but often not directly – most lenders will want to do it through a realtor. These properties are generally sold “as-is”, but in most cases, you’ll be able to view the property before you commit to buying.
Making Your Purchase
It’s easiest to work with a real estate agent, especially when buying directly from lenders. Once you’ve hired one, they’ll be able to help you look for a suitable foreclosed home. If you need a pre-approved mortgage, you want to get this sorted as soon as you can. The same goes for appraisals and inspections where relevant. Once you’ve settled on a property, your realtor can help you finalize the purchase.
Getting Started With Foreclosures
At CapSource, we take pride in offering secure funding to those looking to make real estate investments. We have expert knowledge of the industry, along with a range of loan programs to help you meet your goals. If you’re interested in investing in foreclosures and want to know more about our services, click here to contact us today.