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Are Foreclosures Worth the Legal Red Tape?

Aug 17, 2007
For some, the rewards outweigh the hassles. For others, the hassles mount until they take on nightmarish proportions.

To make money in real estate investing you have to do two things: you have to buy property significantly under value and then sell that property at value or a little above value to secure a profit. The first challenge, then, is to buy property for a lot less than what it is worth which is no easy task.

Sometimes you might luck into a fixer upper in a great neighborhood that is priced just right. Other times you might search in vain for the perfect property. When this happens, foreclosures can fill the void. The truth is that you can find and purchase pre-foreclosures and foreclosures 30% to 60% under value. In the world of real estate investing, there is no sweeter deal than a property that needs minimal work selling for a fraction of what it's worth. But finding these properties takes a lot of legwork and a sale is not guaranteed.

The biggest problem associated with buying foreclosures is that you may not be able to inspect the property or learn much about it at all before you purchase it. This can make it difficult to formulate a plan. The property may also have expensive repair issues that need to be addressed. These issues will become your problem after the sale is final. The goal of real estate investing is to maximize profit while at the same time minimize risk. Buying a property unseen carries a great deal of risk, more risk than many investors wish to take.

Buying a foreclosed property also takes a great deal of pre-planning and leg work. You might also have to invest some money having a title search performed on the property before you even know if you are going to be able to purchase the property. For some, this uncertainty is not an ideal real estate investing situation. They want to know what the future holds and that their investment of time and money is going to pay off. All of which is a gamble in buying foreclosures.

When you buy a foreclosed property at auction you also have to have to come up with a great deal of money to pay for the property in a short amount of time. You will also be required to supply a substantial down payment at the auction, a down payment that you will have to secure before you even know if you will place the winning bid.

Are all of these hassles worth the payoff? The answer for some is a resounding yes. For others, the uncertainty outweighs any of the rewards that can be reaped from investing in a foreclosure.
About the Author
James Klobasa, once broke with no job and $20,000 in debt made a choice that changed his life forever. That choice was investing in Real Estate. With the founder of, The Little Building Co. you too, can learn at Real-Real Estate Investing
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