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Preforeclosure Properties: A Real Estate Investor's Goldmine

Nov 17, 2007
If you are thinking about investing in real estate, now is a good time to do it. With foreclosures on the rise, investors have a unique opportunity to cash in on a failing housing market. Homeowners are sliding into preforeclosure at an all time high and savvy real estate investors see this as a chance to obtain new property.

Preforeclosure is a term that refers to the period of time before foreclosure on a home begins. During this time, the homeowner is not making house payments as in default status on their home loan. This means the bank has filed foreclosure papers, but the sale or auction of the home hasn't occurred. With a fist full of hundred dollar bills and the right knowledge, the real estate investor can pick up the home at a substantial discount. The following are a few inside tips that demonstrate the type of advantages investors have in a preforeclosure market.

Preforeclosure is an opportune time for investors for several reasons. First, when a home is on its way to foreclosure, no one is making payments on the property. This gives the investor leverage because he or she can essentially hold costs and use that weight to get a better deal on the home.

As always, investors should pursue highly motivated individuals who want to sell their property. A homeowner in preforeclosure with the bank hounding them constantly is undoubtedly a highly motivated seller. Lenders in this situation are like the homeowners. They need to liquidate loans gone bad because they don't want to actually repossess the property. With that said, it is easy to see that large discounts can be negotiated.

One of the main keys to successfully investing in a preforeclosure market is to get in and get out before the actual foreclosure and auction occur. If you can negotiate a transaction during pre-foreclosure you avoid the stress of competing for a home in an auction environment. Auctions only leave room for the investor to make poor decisions. Preforeclosure deals keep the investor in control which is a good place be.

Investors, who plan on purchasing and holding the property, generally need a little more money or credit to do so. However, during the preforeclosure market, the investor is essentially taking over where the homebuyer left off. The investor doesn't need to qualify for the home loan but instead can take over payments and not be personally liable for property. To boot, the investor can benefit from the tax advantages the homeowner no longer qualifies for. This is possible by taking the title to the property and putting it in a land trust.

Finally, while a preforeclosure market can be exciting, it still requires the investor to be smart and focused with his or her investing decisions. The savvy investor will not jump on every deal that comes across his path, instead, the idea is to develop and stick to an investing plan that will pay dividends down the road.
About the Author
Omar Johnson is a successful Real Estate Investor and author of the home study course The Real Estate Investor's Guide To Finding The Motivated Seller for more info http://www.findingthemotivatedsellers.com
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