The foreclosure values of homes do not necessarily equate to high profit margins.
Trying to break into the market of foreclosed properties can be exciting, but you need to be careful. The foreclosure values of homes do not necessarily equate to high profit margins. It's important to remember that every opportunity for spectacular profits can be accompanied by an equivalent risk of loss.
Investing in homes in foreclosure is definitely not for the novice home buyer. Before investing in something you've found in foreclosure listings, be sure to seek the advice of a qualified expert. You may want to work with a real estate agent who specializes in foreclosures as well as a real estate attorney.
Title liens are the first source of trouble you should investigate. Many times, a foreclosed or short-sale home won't have a clear title. This can happen because the lender has sold the title to another company, which then sold it to another, which sold it to another, and so on. In cases like this, the exact physical location of the title might be hard to pin down. While the time constraints of a short sale or auction usually won't allow it, you should ask the seller to demonstrate clear title to the property before you deposit money on the home.
Additionally, previous homeowners who've had difficulty keeping up with a mortgage might have had similar troubles with auto loans, credit cards, child support, tax debt and medical bills. Any of these might have resulted in a lien against the property. If you buy a home with liens on the title, you are responsible for the liens.
Many borrowers in default will negotiate a repayment plan with their lender at some stage in the process of foreclosure. Your first warning of this as a potential investor might be the sudden unavailability of a property you've been spending time and money researching. This happens often. The best strategy may be to research more than one property at a time, so you'll have a ready second option if the first home is not auctioned.
It's certainly possible to make money by buying a home in foreclosure. However, you need to be aware of possible foreclosure legal issues that could cost you money. If you want to see free foreclosure listings by zip code, use RealtyNow.