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A Closer Look on Investment Property Foreclosures

What does the term foreclosure mean? Foreclosure is actually the legal proceeding in which a lender (or a mortgagee) gets a court order terminating the borrower’s (mortgagor’s) equitable right of property redemption. Usually, the court order is obtained when the mortgagor fails to pay the loan he or she made to the mortgagee.

The process of foreclosure is usually done by a bank or a secured creditor repossessing or selling the property after the owner has failed to comply with the mortgage agreement.

Investment property foreclosures, to quite a lot of investors, is a great way to get into the real estate business. Both newbies and seasoned professionals can make a lot of money through buying a foreclosure property. But like other endeavors, you should know some details about foreclosure investment business first before you get started. Your investment will only go a long way if you know how you can make the most money possible on every transaction.

Foreclosure investment isn’t something hard to get into if you know some foreclosure information and if you follow the basic game rules. First, define a foreclosed property. A foreclosed property is a property of a person (usually a former mortgagee) because the past owner did not pay his or her mortgage. This means that the mortgagee will have to sell this foreclosure investment property in order to recover any losses.

Investment property foreclosures can deliver huge profits to some. This is why it is quite attractive. There are three ways to buy foreclosures:

1. Buying pre-foreclosure – This is when you buy a property before it goes to auction. The homeowner occupant may be in default on a loan and decides to sell the property to pay for the borrowed money and possibly get some cash to start with too. There may be some risks included in buying a pre-foreclosure property like shouldering big utility bills and some liens that the seller “forgot” to mention. The seller may also be desperate in disposing off his or her property and lies about the real condition of the house and the neighborhood.

2. Buying at the foreclosure auction – This is pretty much the same as any auction. You bid for the property and whoever gives the highest bid wins. There are lots of ways on how to find foreclosures for auction. One of the most popular is by finding one online. However, one downside of buying from an auction is you will not have a real estate agent to guide you through the process. You will have no warranty of any kind which means you have no idea whether liens or loans are still on the property.

3. Buying from the lender after foreclosure — This is also called real estate owned (REOs) or Repos (for “respossessions”). This process is considered pretty safe since REOs are quite similar to buying from a regular sale. Depending on the state, if you find problems after buying a property, you may be able to sue to the former mortgagor who sold you the property and have things fixed with them paying part, if not the whole cost.

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