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Houses: Should You Invest In Foreclosures?

Apr 28, 2008
Houses are notorious for being a smart real estate investment. Even when the housing market is in a slump, house values eventually rebound and nearly always create profit for the homeowner.

In today's shaky real estate market, houses have taken a price beating. Experts report housing prices have plummeted nearly ten percent nationally. Some areas across the United States have been hit even harder, with reported decreases of up to seventeen percent. Add in the millions of foreclosure houses and it's easy to see a very bleak situation.

In reality, the abundance of vacant houses combined with low interest rates and decreased market value has created a buyer's market. Many investors and first-time home buyers are seizing the opportunity to invest in distressed properties such as foreclosures and real estate owned (REO) houses.

Buying foreclosure houses comes with a fair share of headaches and challenges. Most require a considerable amount of repairs or renovations. Some have been neglected for several years and subjected to vandalism. Unless you plan on keeping the property long-term or are a professional house-flipper, investing in foreclosures might not be the best strategy at this time.

Before investing in foreclosure houses, experts advise buyers to obtain a professional inspection and conduct market research. Prices of houses sold in the area within the past six months can be obtained via the Internet or through a Realtor. The goal of investing in foreclosure houses is to purchase them significantly below market value. If this cannot be accomplished, it's probably best to pass on the deal.

A less risky option is to invest in bank foreclosures. When houses are not sold through auction they are given back to the bank. Oftentimes, foreclosure homes have creditor and tax liens attached to them. When these houses are returned to the bank, the liens are usually removed and the house is given a clean title.

Additionally, the bank oftentimes makes repairs and prepares the house for sale. These expenses are added into the sale price. Other times, the houses are sold "as is" and repair costs are left to the buyer. In order to obtain the best deal you'll need to visit bank owned properties and assess the advantages and disadvantages.

Although REO houses typically have a higher price tag than foreclosures sold through auction, they are generally a better deal and can save you a tremendous amount of time. With bank owned properties you won't have to waste time or money removing liens. Nor, will you encounter the possibility of having to evict the previous homeowner, which is sometimes associated with foreclosures sold through auction.

Investing in houses in today's shaky market can be risky, but it can also lead to massive profits in the long-term. By investing in foreclosures today, you can take advantage of reduced prices and interest rates. Not to mention there are plenty of houses to choose from. If you decide to wait until the market rebounds, the deals won't be as lucrative.

Only you can decide if investing in foreclosure houses is the best option for you. Take time to engage in due diligence and conduct market analysis to determine if you are truly getting a good deal. Seriously consider the investment opportunity if you can purchase houses for 20- to 30-percent under market value.
About the Author
Simon Volkov is a private investor who specializes in REO and foreclosure houses. He offers a variety of investment properties at wholesale prices through his free Investors List. Obtain instant access to foreclosure homes and real estate investment opportunities at www.SimonVolkov.com.
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