Right now, there are more opportunities to purchase houses in foreclosure than ever before. Contrary to what you might see on late-night TV or on websites offering information on HOW *YOU* CAN GET RICH WITH FORECLOSURES!!!, investing in foreclosed properties is not a get-rich-quick scheme. It is, however, a get-rich-slowly scheme - *if* you love working with houses, improving them and marketing them, *if* you have a steady cash flow already and *if* you are aware of the legalities of the system and how to make them work for you.
Some people might tell you this is easy money - usually with an expensive seminar or CD attached. However, while foreclosure investment can result in a profit, the unbridled flow of riches just aren't going to happen. You may get lucky with one house and make some money, but this isn't going to happen all the time, nor is it something you can bank on making a steady flow of income with until you accumulate enough knowledge and experience to predict which house is going to be the next 'diamond in the rough'.
Your best bet is to engage the services of a Realtor® who specializes in foreclosure, at the very least, for your first foreclosure investment. Your Realtor® can guide you through the ins and outs of the legal system, help with paperwork, and do the research on foreclosed homes that can net you the best home for your dollar. They also can guide you to publications, educational materials and other tools that you can use in your search for the next foreclosure.
Foreclosures can also be an emotionally harrowing experience, not to mention financially, for the people who have to deal with evictions and/or vindictive former owners. Some former homeowners continue living in 'their' home for as long as they can, even after the eviction papers have been sent. An experienced lawyer can help you with the legalities entailed in eviction. Some people may be spiteful enough to damage or strip the property. Some may even leave behind pets that will damage or foul the property and, if not found in time, die from lack of food and water.
Assuming that you're buying an empty foreclosure, you need to have a good idea of how much is required to get the home back into sellable condition. If you are not proficient in assessing a home, obtain the help of a professional who can go through the home and give you an estimate of what needs to be done. Paint and new carpets are one thing; having to completely rewire the house is quite another!
Allow for a significant chunk of time to do repairs/oversee repairs and improvements. If you are doing a lot of this yourself, you will probably have to devote most of your free time to this endeavor, which can eat into family and friend commitments.
Also, consider what's going to happen when the mortgage is due. You must be able to carry the house for a few months on your own money if repairs take longer than anticipated or if the housing market takes a downturn. If you cannot make the payments due to the fact that you were depending on a quick sale, you'll be in the same position as the people who formerly owned your home.
Another issue with foreclosure is the laws of your state. Some states allow owners to 'buy back' their homes for up to 30 days after a court-ordered auction. Be wary of foreclosures in states that allow this and make sure that the house is definitely yours before you start making improvements.
Investing in foreclosures is not always easy money. There are many pitfalls into which the novice buyer can stumble - even if the buyer has bought other types of properties before. A foreclosure is different. However, with the help of a knowledgeable Realtor®, you can be on your way to a new and potentially profitable hobby.
Joshua Sloan is an experienced San Diego real estate agent. Visit his site at SanDiegoRealEstateBuzz.com for help finding new homes with the San Diego MLS listings.
