Despite the dark clouds created by the foreclosure boom, many investors are thrilled. Foreclosed homes may mean hardship for millions of Americans but for investors, foreclosed homes mean cheap prices and billions of dollars of potential profit.
A home becomes foreclosed upon once the owner is unable to meet their scheduled monthly payments. Many mortgage and real estate analysts believe the recent surge of foreclosed homes is a result of adjustable rate mortgages, or “sub-prime” mortgage loans. An adjustable rate mortgage periodically “adjusts” the interest rate which in turn causes the home owners monthly payments to increase.
Whatever the reason that the homeowner is unable to make their normal scheduled payment, the lender has the right to seize the home and sell it off in order to pay all outstanding debts. The lender who seizes the property is typically desperate to sell after all, the mortgage debt may have sat unpaid and collecting interest for many months or even years. Many times the lender simply places the seized home on the auction block and sells it off to the highest bidder.
Foreclosures have always meant profits to investors but today’s foreclosure market is the biggest it has ever been in American history. The opportunity to purchase a home at a bargain basement price has never been more possible. It may surprise many that the selection of foreclosed homes stretches across all price ranges and conditions and even includes income producing properties. It is not uncommon for a multi-unit apartment complex to reach the auction block.
Many foreclosed homes up for auction will even include pristine, high end homes with extraordinary disparities between the auction price and the real market value. Although such homes are rare finds, a single such home can earn investors hundreds of thousands of dollars. In short, a single pristine home purchased by an investor and resold can provide enough investment income for an entire year!
Despite what television and radio ads might say, foreclosed homes do not offer a get rich quick method. Although pristine homes with low auction prices may provide enough income for an entire year, they may take an entire year to find. With a little patience and research, investors willing to work hard can learn the ropes of the foreclosure market and discover how to avoid common mistakes.
It’s important to understand that information pertaining to foreclosure investment, particularly “lists” of foreclosed homes, provide foreclosure information that is freely available to the public. While foreclosed homes certainly do provide a fantastic opportunities for investors, do not let the potential profits cloud your judgement. Consider joining a real estate investment club in your area or even an online forum for real estate investors. A community of real estate investors will lead you to the information you need to succeed.
