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Understanding Foreclosures And Why They're Not Always The Best Deal

Oct 10, 2007
We have all seen the ads on late night television and the hype that has been generated by many investors regarding foreclosures. There is a lot of speculation that one who gets a foreclosure (or what the banks call a reo) is automatically getting this great deal. There are many great deals for properties out there right now and roe's (real estate owned) are not always the best deals. What is it that separates a great deal from a not so great deal? The answer is very simple. Equity!

A foreclosure that has little or no equity in the home may not be such a great investment for the average person unless the property is in a great location and the buyer can afford to hold onto the property until the market goes up. Often times, investors are lead to believe that they can pick up distressed properties for pennies on the dollar. This is not as common as consumers have been told by the media and infomercials on TV. What they don't tell you are that the banks don't like to lose money on business deals either and negotiating the right deal for a reo can be tricky at times. Finding a home that is a foreclosure with equity on the other hand can be quite tricky as well considering most times the property can be refinanced. The key to doing well in a foreclosure market is to not get greedy. Pick up properties for a little under market value and sell them for a little bit of profit. Investors who don't lose sight of this rule are doing very well and will continue to do so.

The key is to find properties that have enough equity to make them a good buy and to be able to re-sell that property for a profit. Purchasing a property that is fifteen percent under market is a good buy if it can be sold for five or ten percent under market quickly. There is another advantage to doing this. Many of us forget that the banks are operating very conservatively these days and appraisers are doing the same. If the appraisal doesn't come in on target, there can be an issue with the transaction. The key is to keep is simple. It is also important to not lose touch with the fact that it is a buyer's market out there and there are many great deals outside of foreclosures. Keep in mind that it is much easier to deal and negotiate with a seller that has equity in their property and just wants to sell it. Look around for properties that have been on the market for more than a hundred days. Often times, these can be diamonds in the rough.

It is an interesting market out there right now with property values across the United States, and especially New York, San Francisco and Hawaii, skyrocketing to astronomical values. What has happened is that many of us have become accustomed to property values continuing to go up. Everything has its rise and fall and real estate is no different. The days of making three or four hundred percent returns are gone for now and only the very well connected and savvy investors are doing it in this market. The good news is that it is a great time to buy right now.

Please contact Team Enterprise for more information on this topic or visit us online.

Matt Larsen
matt@teamenterprise.com
http://www.teamenterprise.com
http://www.mattlarsenhomes.com
http://www.webproagent.com
About the Author
Matt Larsen is a local real estate professional in the Bay Area. Please visit us online: http://www.teamenterprise.com http://www.mattlarsenhomes.com http://www.webproagent.com
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