Real Estate Preforeclosures Profits

Real Estate Preforeclosures Profits

In order to invest profitably in the pre-foreclosure market, it's necessary to understand all aspects of the foreclosure process and how to operate in each of the stages within that process. It's also necessary to understand what options are available to homeowners so you can see the process through their eyes and help them to make the best decision possible as well as the best one for yourself.

Let's start by looking at the three stages of foreclosure-pre-foreclosure, foreclosure and real estate owned (REO or OREO). As an investor, you can operate in any three of these stages, but, as you'll see, the pre-foreclosure stage offers the greatest profit opportunities and the least amount of hassles.

The Pre-Foreclosure Stage

A pre-foreclosure sale takes place between the time when the lender files suit and when the property is scheduled to be sold at a public foreclosure action or a trustee's sale. Here's an overview of the benefits of buying pre-foreclosure properties so you can contrast them with the disadvantages of the foreclosure and REO stages.

Benefits of Pre-Foreclosure

* Deep discounts
* Ability to research inspect property/more accurate value estimates
* Ability to avoid the potentially expensive bidding process
* Ability to structure sales agreements in a creative fashion
* Less hassle from third parties (lenders, etc.)
* The potential for minimum cash outlay

The Foreclosure Stage

When institutions (banks, lenders, etc.) lend money to individuals for the purchase of a home or other property, they naturally expect to be paid back. They're in the business of lending money to make a profit. When borrowers (mortgagors) fail to meet their mortgage obligations, lenders want the property returned so they can re-sell it to others for a profit or at least reduce their losses. They regain the property through the foreclosure process.

Of course, both mortgagors and lenders will do their utmost to work out an agreement that will allow people to keep their homes and the lender to keep receiving payments. In addition, neither the mortgagors nor the lenders want the legal complications of the foreclosure process. Unfortunately for them -but fortunately for you!- they can't always work out an agreement, and the lenders have to initiate foreclosure proceedings.

So, how is the foreclosure process begun and what's involved in it? It's important for you to be aware that every state and county has different rules and regulations that you'll need to learn well. Otherwise, you may miss something or make a mistake than can cost you money. However, in general, every state within the U.S. uses one of two types of foreclosure-judicial and non-judicial.

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