Are Property Foreclosures the Investment For You?

Owners default on their home loans for many reasons. It could be illness, the death of a spouse, divorce, loss of employment, or some other crisis.

The fact that our economy is in deep recession only adds to the stress on these factors. Property foreclosures are a fact of life, and even though there are ways to prevent this from happening, there are still hundreds of thousands of auctions in the listings nationwide.

Typically, a lender will try to work out some type of arrangement with the homeowner to make up payments. This is called Loss Mitigation, and is part of the pre-foreclosure process.

Sometimes, investors will enter this stage of the process, offering to buy the house from the owner directly. If there are no investors at this stage, and the owner is unable to make up payments, then the lender will initiate property foreclosure usually within 3 months.

Lenders must follow the applicable laws for the state they are in. If it is a state that uses mortgages to document property ownership, then the lender must follow a judicial procedure to prove default, which involves a court case.

In states where property ownership is documented by a Deed of Trust, a non-judicial procedure is used and no court case is necessary. In the latter case, a foreclosure can be initiated in as little as 30 days.

When the lender places the foreclosed property up for auction and there are no buyers, then the property is termed REO for Real Estate Owned.

This is where the lender is now the property owner. REOs are also listed along with pre-foreclosures and foreclosures, but can also be found by contacting the lending institution or their attorneys.

As an investor, you can usually buy pre-foreclosures directly from the homeowner. Property foreclosures and REOs can be purchased directly from the lending institution, except in the case of REOs that are government owned.

In this situation, a real estate agent must submit a bid to the government agency, whether it is HUD, the VA, Fannie Mae, or some other agency. These realtors must be licensed to do business with the government and they specialize in these properties, submitting bids according to government rules.

Comprehensive databases are available online that give detailed listings for pre-foreclosures, property foreclosures, REOs, government owned properties, and even corporate sellers.

Some sites update their databases daily, which means you have the latest information available, to sort according to your specifications.

This can also save a lot of time researching things like second and third mortgages and possible liens on the properties your are interested in. Having this kind of resource available is a must if you stand a chance against your competition.