How to Buy A Foreclosure

Most people when considering investing in real estate immediately think of foreclosures. A foreclosure is when a lender has taken back a property they previously provided a loan on. This happens when the borrower or home owner stops making payments, and defaults on that loan. After a pretty extensive process of taking back the property, the lender will need to find a way to recoup the cash they have lost.

A lender is in the business of.....lending. They do not wish to own real estate, or businesses, or anything else except for loans that people pay back with interest. When they are stuck with a bad debt and take back the property, they have to find an outlet for it. This is generally where an REO agent comes into play. This is a broker or team of agents who have inside access to these properties as they become available for the public to purchase. Agents will list these properties like anything else, but they are usually distressed, not maintained, or out of date. This is where the opportunity lies!

Now it is important to understand how to deal with a bank or lender. They have no emotional attachment to this property like a regular seller does. They don't care about it, they simply are looking at the numbers. They also want to know that you as an investor are capable of buying the property. This is why most times they will require cash deals only or lack of contingencies to show them you are serious about purchasing the property. When offering on these properties, feel free to low ball or ask for a steep discount as the bank has no attachment to it. It never hurts to ask! Once you agree upon a price, just like other investment purchases you'll need to put money down and come up with the cash to close on the property.

These types of properties generally come with issues with the plumbing, utilities, and sewer lines because they have not been in use for years. Not saying that all foreclosures come with these issues, but most do. Be cautious of what you are buying and make sure to do your homework before pulling the trigger. If you analyze the deal right, and get it for a great discount, you can really find some winners in the foreclosure market!