So, You Want to Get Started with Real Estate Foreclosures?

A mortgage is required to purchase a real estate foreclosure, short sale, or REO property. The mortgage lender will provide you with a pre-approval letter, which shows how much you can borrow based on your credit score and income. Most mortgages require ten to twenty percent down and a high interest rate, so it's important to be prepared to pay a higher interest rate. If you're serious about purchasing a foreclosure, however, it is essential to find the right mortgage.

Before the mortgage meltdown, buying a foreclosed home could be a tedious process. Real estate bargain hunters had to attend courthouse auctions and sift through legal filings. But, the response to the subprime meltdown increased the number of foreclosed homes, and the process of searching for them is much easier than it used to be. A foreclosure is similar to searching for a home, but the biggest draw is the bargain prices. Other disadvantages include the lengthy approval process, potential condition problems, and competition from professional flippers. However, some people are able to obtain government-sponsored financing to purchase foreclosure properties.

Depending on the location and type of property, foreclosed homes can offer a great deal for investors. However, they need extensive repairs. Since the previous owners usually leave behind "presents" for the institution, many foreclosed homes sit vacant for long periods of time. This may be due to their poor condition or the slowness of the bank. It is therefore important to consider these factors before making a final decision.

Banks are usually more willing to negotiate for lower prices if they have large inventories. The longer a bank owns a property, the higher the chances that it will seriously consider your offer. A good rule of thumb is to make your initial offer at 20% less than the current market price. In some areas, it is best to bid higher if competition is high. Then, use an agent to help you create a winning bid.

If you're new to working with REO listings, understanding the market is essential. Understanding varying trends will allow you to identify potential opportunities and pitch them more effectively. For example, if foreclosure rates are increasing, you may have more opportunities to land a listing than you'd expect. If the market is improving, you'll have an even bigger pool of potential clients. And if the market continues to improve, there's always room for growth.

Foreclosure auctions are often held on city courthouse steps. Local law enforcement agencies are in charge of managing foreclosure auctions. The banks are trying to recover their money by removing the homeowner, who is then evicted from the property. Many homes are purchased with government-guaranteed loans. After the foreclosure sale, the lender is selling off the home to recoup some of their money.

When purchasing a foreclosure, you can usually buy the property without an appraisal or home inspection. The mortgage broker or agent can help you find the right property that matches your needs and budget. If the property needs repairs or renovations, you may wish to hire a real estate professional. When the mortgage lender has approved your offer, your agent can prepare the closing documents and submit your offer. This will ensure you'll get your money's worth.