Bank Foreclosures a Profitable Investment?

by John Appleseed

Bank Foreclosure Investing

Several people, especially those new to real estate investing, will prefer bank foreclosure to any other form of property buying because they think that they are safe properties to buy. Their understanding is that the bank owns the property and therefore they are free from all liabilities and other negative encumbrances. Though a bank foreclosure can be safe, the bank never owns the property. The property has only been pledged as collateral, meaning in the event of default of loan payment, the property should be disposed to redeem the loan.

Bank foreclosure property many not be cheap

Many people also believe that bank foreclosure is cheap, no matter what. It is held that the bank must sell the property the same amount it cost so such prices are not highly marked. Many people who hold this idea may be in for disappointment because if the lender becomes the successful bidder at this auction, then the propeerty can be sold at any price. The bank also wants profit it needs to stay in business by operating at great profits.

Nevertheless, buying bank foreclosure still remains the popular way method of buying property. The process is fairly easy and a lot of risks associated with other forms of purchase are either eliminated or reduced in the bank foreclosure.

How to assess properties for sale

To buy bank foreclosure, scout for announcements or notices in the newspapers or from the courts. You can also contact a real estate agent for such notices or use a listing service. In your search, you have to be guided by a set of criteria to get the best deals. To make a great investment, you will have to determine your own investment policies and get properties that are close to you. You should also be mindful of the price. Are they reasonable? Look at the architectural design. Will it be a good sale if you intend to resell it? If you intend to occupy the place yourself, consider the neighborhood. Is it a well-developed area with full services? Has it got enough rooms for you and your kids?

Summary

For the real estate investor or home buyer, foreclosures are an opportunity to acquire property that can serve as a investment or as a primary residence.

Acquiring foreclosures after the sale, whether from an auction, or from the bank or other lending institution (referred to as REOs or real estate owned) is essentially the same as buying from any other seller in a normal transaction. Therefore, its in best interest to understand and educate yourself in foreclosure process if you choose to pursue these opportunities.

John Appleseed is contributor to Bank Foreclosure Listings, where is insider knowledge of Bank REO strategies are freely shared.