Profits from House Foreclosures

"How can I buy a foreclosure house around here?" That question was asked of me a few weeks ago at my favorite coffee house, which I often frequent on Saturday mornings. The questioner was one of my former college real estate law students.

This polite young lady explained she and her husband have been trying to buy a house or condo "the regular way" but everything seems so expensive. That's why they are now looking into buying a foreclosure house, although she remembers from the course about the pros and cons of these distress properties.

We had a brief discussion about the three foreclosure purchase opportunities. But then I made a very bad mistake. Oops! I used a dirty four-letter word I probably should have avoided. It is W-O-R-K.

I reminded my former college student that if buying foreclosure bargains was easy, everybody would be doing it. Then I shared how she and her husband can track foreclosure houses, condos and other properties to determine when the best time to buy is. Suddenly, she lost interest in foreclosures and the work involved as she spotted her husband coming in the door.

What Causes Foreclosures

By the time a house, condo or other property enters the foreclosure cycle, the borrower is at least 30 to 60 days behind in mortgage payments. There are many foreclosure causes, such as divorce, illness, death, unemployment, drug and alcohol addictions, mental problems, and local economic conditions.

Statistically, less than 1 percent of homes go through foreclosure each year. But whatever the cause of mortgage default, somebody is going to benefit. If you didn't cause the borrower's default, that person who profits might as well be you.