- Personal Finance
Foreclosure Homes for Sale: Inside Info You Need to Know If You're a New Investor
Foreclosure homes for sale can be found on almost every corner these days. Consequently, many newbies are jumping into the market – trying to hit the jackpot in one fell swoop. But, just because a property is a foreclosure does not mean it's going to be a steal. And, you can lose your shirt if you're not careful.
If you're a first-time investor interested in picking up one or a few foreclosure homes for sale, it pays to know the different types of foreclosures. Following are three types of foreclosed properties, as well as some advice on which one may be the best bargain.
The 3 Types of Foreclosed Homes for Sale Explained
I. Preforeclosures: As the name suggests, these properties are still with the owners; but they are headed for foreclosure.
Oftentimes, as an investor, you can craft some great deals by dealing directly with owners. This is because many are willing to do things like short sales. FYI, short sales are when a property sells for less than what is owed on the mortgage.
All short sales have to be approved by the lender. So even though you may strike a deal with the owner, unless it is accepted by the lender (who is the real legal owner of a property until the mortgage is paid in full), it won't mean a hill of beans.
II. Courthouse Step Sales: AKA Sheriff's Auctions, these are exactly what they sound like. This is when a bank (or other lender) sells a home at public auction to the highest bidder.
Investing in foreclosure homes for sale in this arena is best left to the professionals. Why? Because while you can definitely pick up some great investments, you don't know what you're getting.
To explain further, there's no time for an inspection. Foreclosed properties are sold "as is” at Sheriff's Sales.
Furthermore, the lender sets the price --- it's not like it starts at $1 and goes up. Lenders put a property on the market starting at what's owed on it usually. So, for example, if a homeowner owes $50,000 on a property, that's what the starting bid would be.
Final not about buying foreclosed properties on the courthouse steps: Get your financing lined up. In most cases, you're paying "cash on the barrel.” So you have to pay up right after the auction in most cases. In fact, in many counties, you have to have proof of funds to even bid.
For all of these reasons, foreclosure homes for sale on courthouse steps are best left to professional real estate investors.
III. Repossessed Foreclosed Properties: If a property fails to sell at auction, it stays with the lender. Here is where some really good deals can be found, primarily for the following reason: because a property failed to sell at auction, a lender may drop the price and even offer incentives when it comes to financing.
Foreclosure Homes for Sale: Best Deals for New Investors
If you're new to buying foreclosed homes for sale, preforeclosure properties and repossessions are the deals to pursue. Leave foreclosed homes for sale on courthouse steps for the professionals.