Pros and consof this option?

Maisondetre · Joined: 07 Jun 2007 Posts: 18 Location: PA

Hi all, I haven't explored foreclosures, but am really thinking I ought to. Not sure if this is fair, or whether I ought to stay away and not even entertain the thought...

Any ideas?
What are some of the pros/cons/pitfalls?

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

It's always a good idea to check all of your options.

On F/C's many times there are maintenance issues, and frequently it's hard to get them to let you in to see the property before you even make an offer.

I deal with these a lot because of my specialty in lending, so keep in mind if you're going to look at foreclosure properties, you'll either want to have some money set aside for updating / maintaining the property, or have access to financing that will let you do it.

Remember, if they could have afforded to keep the house in good shape, they'd have kept the payments going.

m2c · Joined: 03 Aug 2005 Posts: 743

Depends a bit on what you mean by “foreclosures” as in “stage of”.

Buying “foreclosures” after the fact, i.e. in REO status, has advantages. Typically lender is more than happy to sell “below market”, you have access to have a home inspection performed, and physical appraisal is possible if you need mortgage financing. However, many properties bypass the lender REO stage and proceed directly to the bureaucratic hassle of government or “quasi”government quagmire – FHA, VA, Fannie and Freddie. Delays, delays delays (from actual sale date) and a Realtor is usually involved.

Buying at the foreclosure sale offers the most potential benefit but also increased risks. If you need mortgage financing on the specific property involved, there are normally problems obtaining access by the appraiser to the property. Time limits to come up with the balance of the sale price are short and you risk loss of your “deposit” if you fail. Likely you will not have the opportunity to get a home inspection. Always get a title insurance policy; do not trust the “validity” of the foreclosure sale. Doesn’t happen often but I have seen deals where service was not proper and the former owner has come back and claimed the home … after the buyer at the foreclosure sale has dumped a lot of money into fixing the property. First lien holders will typically bid up to “dept plus all costs” which might limit the your advantage in getting a good value. Many times 2nd lien holders will “walk away” leaving some buying opportunities. There are profit potentials but most people who “make money” have cash in the bank or financing prearranged on security other than the property to be bought at the foreclosure sale.

Maisondetre · Joined: 07 Jun 2007 Posts: 18 Location: PA

Thanks guys!

What's REO status by the way?
What other stages are there?

Is there a particular source for foreclosure information/data? I did find a few links online but they seem to have no info at all (0 bath 0 bedroom!!)

chow · Posted: Sat Jun 16, 2007 8:21 pm Post subject:

This question is scary.

I'm just going to hit the back button or the big red X

Maisondetre · Joined: 07 Jun 2007 Posts: 18 Location: PA

Stay away from foreclosures then, Chow???

becomemortgagefree · Joined: 20 Jun 2007 Posts: 1

Hello, this is my 1st post here.

REO stands for Real Estate Owed. These are properties that the mortgage company took back in a foreclosure.

I have been investing in Real Estate for about 5 years. I do not do a whole lot of buying of foreclosures, but you can get a good deal here. The hardest part is there is more legwork involved, as a real estate agent is not necessarily gonna be your best route. There are many sources to find properties that are going into foreclosure. You can google foreclosure properties and see a whole bunch along with sources on how-to. If you have any specific questions I may be able to help.