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The precautions when buying Foreclosures

Topic: Mortgage

Have you ever think where is a down side in Real Estate investment strategy? One of the cons of buying foreclosures is the laws that protect the homeowners.

Homeowners usually face foreclosure on their properties for failing to pay their mortgage payments. When a homeowner falls more than two full months behind in payments, the lender usually begins foreclosure proceedings. While this presents some very good opportunities for a buy low and sell high Real Estate deal, there are some downsides to the process.

The laws of the various States differ, but in general, they seem to be bending over backwards to protect the rights of the home owners. This is understandable since the properties are often the primary residence of the owner and his family. The image of the bank agent in a black suit and a slick black mustache waving a foreclosure notice at some poor widow and her brood of children is a popular cultural image in America. In most cases, the laws allow the homeowner opportunities to make up his arrearages and recover his property. In some cases, this can even happen after the property is sold to you.

There is an ethical issue involved, too. The person losing their home to foreclosure may not be a poor widow with children, but they have obviously fallen on hard times. Most investors will have the attitude that business is business and many foreclosures sales actually help the homeowner retain some equity in his property even he is forced to sell it under full market value. Despite all this, the fact remains that you are making a profit out of the misfortune of another.

Another con of buying foreclosures is that there may be a delay in actually getting the current tenants out of the property. In some States, it may take as long as a year before they have to leave. In many other States, it still takes up to four months. During this period, you are unable to being the upgrades you are planning or actually take possession of your new property.

The buying of foreclosure properties is one of the most valuable tools in creative Real Estate investing, but there are some potential problems. It is not a transaction you want to get involved in with your eyes closed. If you are cognizant of the risks involved and understand the applicable laws. And the last thing under market value it can be very profitable to acquire properties with down payment.


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Hello,Please let me know if there is something for my hsabund to qualify for as far as refinancing/mortgage with Wells Fargo, and the City of Carlsbad. We purchased our first home/condo under the city's housing authority guidlines a few years ago because we qualified for low income housing. However, we are almost done devorcing, and Im willing to let him keep the house. If you can send me anything about our presidents plan to help the 5 states, ours included, I will give it to my attorney to read. Thanks, Catherine Finn (email is )
read more... 05/02/2012

AFAICT you've covered all the bases with this awnser!
read more... 08/11/2011

Read all comments: 2


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