3 Big Reasons To Invest In Pre-Foreclosures

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[Harry]

1.) When people are in default on their mortgage they have stopped making payments to the bank. So when you are negotiating with the seller, and the bank, right up until the point where you buy, no-one is making the payments. For novice investors worried about holding costs this is a huge advantage.

2.) Preforeclosures are a very well defined niche market. One of the most deadly mistakes rookie investors make is trying to be a jack-of-all-trades, going after any and everything they can lay their eyes on. The result of this lack of focus is they are soon back at their jobs. By being a very defined market, preforeclosures allow you to develop focused marketing campaigns and standardized processes to get deals completed and closed.

3.) Buying houses in preforeclosure enables you to create unusually large equity spreads. Recent economic uncertainty has caused a lot of foreclosures, and rising rates will cause more in coming years. If banks had to take back all of the properties that went into foreclosure the FDIC would shut them down. They know this, so they try not to take properties back they don't have to. By requesting the lender discount what is owed on their payoff, large spreads of equity can be created on houses that are totally "maxed out" with loans. This can't be done on loans not in default.

[michlele21]

im thinking twice in investing foreclosures. Is it really wise to get this time?

[RebelBroker]

Pre-foreclosures are tough. I did it for a while up in Auburn, CA when I was living in that area and it can take an emotional toll. I used to hit city hall and look up all the latest pre-cursors to foreclosure (notices of default, etc) and then contact the owners.

The biggest challenge in this market is that most folks in this situation are underwater to the point that you cannot make a deal happen. You end up having to get into the short sale scenario and that is possible when you act as the buyer, but the stories I have heard from buyer/investors are dicey.

R

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