Real Estate: Foreclosures

Foreclosed real estate can usually be bought for a much lower price than the property's market value, and hence it can be a really good way to make a profit from real estate. The price is usually around 10% lower than market value, but can be as much as 30% lower, which gives you a great margin for profit.

Although you can make a nice sum of money from buying and re-selling foreclosed properties, there are some guidelines which must be closely followed. Remember that for a property to have been foreclosed on, the previous owner must have been unable to make mortgage payments, which meant that the property was seized by the lender, who are now selling the property in order to try and recoup losses.

This means that the seller knows just how much money they need to make out of the sale, and you can often do without the services of an appraiser. When you hire an appraiser, they inspect the property you are considering, and estimate its value. This service costs you about $600. The bank can then dispute the appraisal, and you have to begin again. If you can dispense with an appraiser's services, it will save you both time and money.

Foreclosed properties can often be found at a great price, and if you spend a little time and money on fixing up and modernizing, you can make a sizeable profit on the resale. It is quite likely that the previous owner, who could not make the mortgage payments, was also unable to afford to maintain the property sufficiently and there may be quite a lot of maintenance work to do (plumbing, gardening and so on). Whilst this kind of work can significantly affect the price of the house when you buy it, these are often quite easy repairs to make, which once done will make a sizeable difference to the price you can sell for. Again, if you are able to do this kind of work yourself, rather than paying someone else to do it, you will increase your profit margin even more, as well as saving yourself a significant amount of time.

From time to time there are government auctions of HUD properties, which you can buy for a very low price, and if you are lucky enough to happen upon one of these, you can make a very large profit on the re-sale after doing a few repairs. There is however usually fierce competition for these properties at auction, because other potential buyers are looking for the same kind of investment opportunity as you are.

Overall, it is quite simple to buy foreclosed real estate, and if you have the skills to work on the property yourself, and a bit of money behind you, then you can fix it up and sell for a respectable profit. The seller, being a lending organization interested mainly in recouping losses, is usually prepared to sell cheaply, without the bother or delay of trying to find a buyer at a higher price. Thus everyone, except the poor person who lost the property, is happy.