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Home Investing in real estate
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Written by Administrator   
Friday, 27 March 2009 01:42

Investing in real estate

Right now more than ever, there are investing in real estate opportunities all over the place. From foreclosures, to bank REO's (real estate owned) to auctions, there is literally a sea of properties that is flooding the market. These record numbers of foreclosures and REO's mean investing in real estate opportunities are literally everywhere. Here are some of the opportunities available:

Short sales

A "short sale" is a property in foreclosure where a person or investor bought a property, financed most or all of it through a mortgage, then the property declined in value below what is owed on the mortgage. In these cases the owner may decide it's not worth it to continue making the payments, or they may be already having financial problems and couldn't make them even if they wanted to. Under normal circumstances the property would go through the entire foreclosure process and the lender would end up owning the property as an REO. To avoid this, many lenders are working with the owners/borrowers and agreeing to sell these properties at a loss to avoid owning the property. Here there is an opportunity to buy properties at a discount to market since all parties involved simply want to sell the property as quickly as possible. This works out good for the borrower because their credit report will avoid the black mark of a foreclosure, and it works out better for the lender because they can get the mortgage off their books and avoid further losses.

Foreclosure and REO properties

"Foreclosure" is simply the legal term for the process a lender takes when a mortgage loan goes into default. The borrower has stopped making payments, and the lender is forced to take steps to sell the property to protect their interest in the mortgage. Foreclosure can be a lengthy process, sometimes lasting months from the time the borrower is notified that that they are in default.

If the property is not purchased prior to being foreclosed, the next step would be for the property to go to foreclosure auction and sold to the highest bidder. If no bids are received and this does not result in a sale, then the property reverts to the lender, which is then called "real estate owned" or REO.

Contrary to what you may think, banks and other lenders DO NOT want to end up owning these properties! In many cases they've already lost money on the mortgage, and they will end up taking additional losses in maintaining the property while it is marketed for sale. Further losses may also result if they need to write down the property on their books, since they are required to carry it at market value. So in a declining market these losses can be substantial. As you can imagine, this creates endless opportunities for real estate investors, because of the leverage they have in obtaining these properties at a discount.

Finding properties

There are many ways to find real estate investing opportunities. You can check MLS (multiple listing service) for properties for sale. MLS is a huge database which contains all properties that realtors list for sale in the US. I like realtor.com where you can browse through these listings for free. However, you won't always know which properites are foreclosures or bank owned since they are mixed in with regular listings. Also, you won't even find all foreclosures on MLS since they are not that far in the process yet. If you want to know exactly which properties are foreclosures and REO's, the biggest and best site out there is realtytrac.com, which to my knowledge is the only site that lists everything from foreclosures to auction properties, to for-sale-by-owner (FSBO's), to REO's, to new construction properties for sale, as well as everything on MLS that you would find on realtor.com. This site lists properties as soon as a default notice has been filed (pre-foreclosure) so you'll find many properties here that you won't find on MLS. You can browse listings for free, although there is a small fee to upgrade your membership for access to the property address. Check them out at realtytrac.com. For property auctions, you can check out REDC, at ushomeauction.com. They do not charge a fee and they list properties with pictures and the property address if you actually want to drive by and check them out. However this site only lists auction properties so it is only a portion of what you can find on Realty Trac.

So this is the basics on finding opportunities, however I will be expanding this section to talk about the real estate auction process so check back soon!

Back to Real Estate Basics from Investing In Real Estate Opportunities

Last Updated on Sunday, 29 March 2009 14:28