Foreclosures are a sure-fire way to make money in real estate investing IF you know how to do it right. The best time to do a foreclosure deal is in the pre-foreclosure phase. Learning the most effective ways to invest in foreclosures and pre-foreclosures can bring much success in a real estate investing career.
Why Do Foreclosures Make A Good Investment?
There are several reasons:
- The homeowner and the lender are both motivated.
- There are generally always available foreclosures in any given market.
- You can turn a quick profit because foreclosure deals are usually deadline driven.
What Exactly Is A Foreclosure?
A home goes into foreclosure if the homeowner has become delinquent on payments. The bank will then attempt to sell the home in an auction. When you work with a seller who is in foreclosure (or close to being there), it can be beneficial to both you and the homeowner.
What Are The Steps In The Foreclosure Process?
- The bank will issue a notice to foreclose after a homeowner is delinquent and cannot make the payment of the principal plus interest. This usually happens after three to six months of missed payments.
- The homeowner will get a notice of sale, and the bank will give them a chance to make the back payments, or sell the property to pay back the loan. This is the best time for you to jump in as an investor.
- If the owner is not able to pay the loan or sell the home, the bank puts the property up for auction. The highest bid wins.
- If the auction is not successful, the home becomes repossessed by the bank (or an REO property)
Now obviously these are just the high points of what a foreclosure looks like, but it can give you an idea of how the process works. Also keep in mind that each state has its own specific foreclosure laws, and so it is important to research the process at the state level.
Where Do I Find Foreclosures?
There are many ways to locate foreclosure and pre-closure deals including, but not limited to:
- Asking for a current list from a title company
- Going through public records yourself
- Finding a foreclosure list provider to subscribe to
These methods all work, it will just depend on your budget and how much time you want to spend.
How Can I Make Money In Foreclosures?
Not all foreclosure deals are profitable. The key is to begin learning the best ways to invest in this type of real estate using our Unlimited Funding Method, which you can access for free. The key is investing in real estate without using your own money or credit, which is explained in depth in the Unlimited Funding Program.
In general, as mentioned above, the best time to do a foreclosure deal is before the process ends, or before the auction. This is when the homeowner will be the most motivated and will be grateful to you for helping them before the property is foreclosed.