The business of buying foreclosed homes is a good way to buy cheap properties at prices that can produce instant equity upfront. With a record number of foreclosed properties, many individuals have decided to jump into buying foreclosure homes. According to some seasoned investors who have noticed an increase in competition, more people are taking advantage of what may be one of the best investment prospects to come along in years.
Foreclosure homes investors benefit by utilizing a number of foreclosure investment strategies for making money, such as flipping foreclosed properties or renting home foreclosures to tenants.
The business of buying foreclosed homes requires building a solid foundation by learning about foreclosed properties investing. The home foreclosure business has numerous stages during which investors can obtain foreclosed homes: pre-foreclosure, home foreclosures auctions and banked owned foreclosed properties.
Investing in home foreclosures without learning the different twists can turn buying foreclosed homes from a promising opportunity to the nightmare of a lifetime. Following are three mistakes investors should avoid when buying foreclosed homes:
1) Under-Capitalized Investors
Creative financing techniques make buying foreclosed homes with“no money down” possible. Generally, this type of transaction requires the property owner to finance the down payment; the investor can borrow the funds or have a partner put up the money. Nonetheless, home foreclosures investing requires an investment of money at some juncture. Foreclosed properties investors must make debt payments to lenders or pay contractors to complete renovations to prepare properties to rent or sell.
2) Not Knowing State Foreclosure Laws
The process and laws for home foreclosures differs among the states. Each state regulates how homes foreclosures are handle. Foreclosure investors must accept total responsibility for knowing the laws and possess an awareness of statutes affect buying foreclosed homes.
Do not depend on your, banker, seller, agent, accountant or attorney. Successful foreclosure investors learn all they can about the foreclosure process and applicable laws. Start by determining if your state has judicial foreclosures, non-judicial foreclosures or both. Find out what happen post foreclosure, including if the state allows a redemption period for foreclosure homes owners to regain their properties. Learn how foreclosed homes public auctions work in the county where you plan to buy home foreclosures.
An unawareness of the law can cost you a bundle. Some states have very specific rules about buying foreclosed properties. For instance, Florida requires home foreclosures investors to put contracts in writing, prepare documents with a specific font, and include a right of cancellation clause among other requirements.
Violators can receive fines up to $15,000 for each infraction. Do not rely on real estate agents for legal advice. Hire a skilled real estate attorney who has a record of accomplishment working with foreclosure homes investors. Request the lawyer to review your documents to ensure the paperwork meets the state’s legal requirements.
3) Failing to Perform Due Diligence
Foreclosed properties investors taking possession of real estate in pre-foreclosure from the owner or buying foreclosed homes at the courthouse should always read and understand the “fine print” to avoid surprises when buying foreclosed homes. For example, if taking the home subject to an “existing mortgage,” take the time to read the mortgage document and understand the terms of the mortgage.
Most importantly, before placing a bid at the auction, pay for a title search from a title search company or real estate lawyer, which will uncover if the home has other liens or names on the title.
Buying foreclosed homes, even cheap houses, requires a constant vigilance to not to let your guard down. Complete the due diligence on all foreclosures homes purchases. If possible, have foreclosed properties inspected by a professional inspector.