Many investors rely on foreclosures in order to secure a high equity property at a discounted price. A foreclosure happens when a borrower defaults on his loan. The lender files a lawsuit against the borrower, and then the foreclosed home gets sold at an auction to a winning bidder. In fact, because there are quite a few sub-prime borrowers in trouble, there will be a lot of foreclosures in the near future. This prediction increasingly becomes a reality when the following statistics are made public:
“According to the Mortgage Bankers Association's National Delinquency Survey, 4.95 percent of mortgage loans were delinquent in the last quarter of 2006. That’s an increase from 4.67 percent of loans delinquent from July through September. And compared to a year ago, the delinquency rates increased as well. Then, 4.7 percent of home loan payments nationwide were late. In particular, sub-prime borrowers continued to have difficulties making their loan payments. Over 13.3 percent of sub-prime loans were delinquent, compared to 11.6 percent a year earlier." Read more...
You also might want to consider buying REO (Real Estate Owned) properties, which are properties owned by the bank. Although these properties have gone through the foreclosure procedure, no bids were placed on them for purchase. There are many benefits of buying REOs:
- All liens against a property are removed.
- The bank or lender that owns the property will often furnish a grant so you can make repairs.
- You can receive better financing options than on other properties.
- REOs can be found in your local MLS (multiple listing service), or through a visit through an REO bank.
- Quite often, REOs contain appliances.
- Unlike properties sold at a foreclosure auction, REOs can be inspected before contract and can be listed with real estate agents.
- If the market is slow, you can usually purchase an REO at a discounted price, but during a hotter market, the prices between REOs and typical properties.
- Usually all the back taxes are paid by the seller.
Perhaps the greatest beauty of investing is that there really is no age limit. If you’re a student, and can get enough money together—maybe by borrowing from your parents or taking out a student loan—you can buy a property to live in and then rent out the other rooms to friends or other students. The money you earn from rent could nearly cover your entire mortgage. This is a great way to get started and learn about real estate. Plus, this experience could provide a better education than any class you might take in business.
The idea is to get creative. Buy a condo and rent out a room or two, or live in the upstairs and rent out the first floor. That’s why it’s a good idea to explore the area where you'd like to own property. Once you see different properties, new ideas will come to you. As part of your plan and goals, set aside time to walk through a few properties each weekend and establish relationships with real estate agents. Tell them what you’re looking for and explain to them your goals. Like stated above, it’s important to get your name out in the field and to establish yourself as a serious contender.
FIND REOs: To locate a real estate broker in your area: Simply enter the zip code of your property and hit 'Search'! REO Network will display local Brokers, Appraisers, Attorneys, Contractors, Escrow & Title companies, Inspectors, and more!
Then there are homes for sale by the government that have gone into foreclosure at HomeSales.gov (first choice of these properties going to the if you will live there as the homeowner)