This is the stage where the homeowner is still in control of the property. Although the loan is in default and the pressure from the lenders is just beginning. The homeowner is usually in a position to sell the property quickly and avoid the foreclosure process all together. This means hue savings and large potential profits for you.
20-40% discounts on the estimate value
Low or no down payment, due to the built in equity
Research and inspection opportunities
Sales agreements that are flexible
Home owner may not be reachable
Fierce competition, many investors are trying to buy these type foreclosures
Time to research documents and court filings
Undisclosed or underlying liens against the property
Possibly the most profitable stage of a foreclosure. Auctioned properties usually offer the best potential profit when buying foreclosures. An auctioned property is sold during a public auction to the highest bidder. If you have done you, research these types of properties are sometimes sold way under market value.
Greater discounts can be as high as 35-50%
Great ROI, return on investment
Greater potential profit
Property inspection is generally not available
Postponed auctions mean valuable time lost and research wasted
Large down payments that must be paid at the time of auction
Incomplete research can cost you a lot of money
You may not win the auction at all
An REO occurs when the lender retains the property after the auction phase. If the bids are not high, enough during the auto the lender will bid on the property to seize control and resell it themselves. In most case, the property has no value to the lender until the house sells; in this case, the lender is usually motivated to sell the property fast.
Discounts of 5-18%
Clear title, free of all liens
Back taxes are up to date
Lenders may do the repairs, or offer additional discounts
Low ROI, return on investment
Research must be very through
Potential for loss in the end
When investing in real estate, especially in foreclosures there is great risk involved. While the potential to make a substantial profit in foreclosures you need to make sure that, you do your research and fully understand what your risks are. Properties that offer the greatest profit potential are often times the risky investments.