Buy A Foreclosure Home

It’s a tragedy that many people are forfeiting their homes during this sub-prime real estate crisis. It was recently reported that foreclosures account for 50% of the homes currently being sold in the US. Even though many people are losing their homes, there are many others who can finally afford a home or are now investing into real estate and taking advantage of these discounted prices.

Donald Trump is a great example of someone who was investing in real estate during a downturn in the market. Now look at him! “There are always opportunities”, he is quoted as saying. “When I first started out in Manhattan, everyone was saying what a terrible market it was”. He admits if he had listened to the nay Sayers he won’t be were he is today.

Many of the top real estate investors, including Mr. Trump, now feel that this is currently a good time to invest in real estate by purchasing pre-foreclosed or foreclosed properties.

The main reason is unlike foreclosures, a pre-foreclosure is made privately between the owner and buyer and therefore avoids the bank auction foreclosure process. This provides many advantages to the buyer including more time to inspect the inside of the house and a better chance to establish a mortgage with a bank.

When looking to purchase a pre-foreclosure you also need to pay closer attention to the macro aspects (I’ll cover micro aspects in a later article) of the property in order to limit your risk as much as possible. Some of these property macro aspects are:

- Try to find out how many other homes in the neighborhood are in pre-foreclosure or foreclosure. It’s best if the home you’re interested in is one of the only houses under financial strain. In order for properties to appreciate the number of foreclosures has to be minimal.

- Ask around to find out whether the rent rates in the neighborhood are going up or down. Buying in a neighborhood where demand for rental units is on the increase is important.

- How strong is the economy at the town and county levels? Is the current employment rate growing or stagnating?

- Contact the local government to find out about any upcoming infrastructure plans. Plans such as new building permits, train lines, shopping centers and corporations establishing a local presence, would be a good indication of community growth.

- What are the demographics? If there is an extremely high level of seniors in town and only a small percentage living in nursing homes, guess what, it could cause a housing surplus within 10 years or so.

If these macro aspects all work out in your favor, and if the inspection of the house goes well, then chances are it’s a great opportunity for you to buy that pre-foreclosed home. When it comes to making a mint in real estate it’s all about timing and location.