A foreclosed home is shown in Mountain View, Calif., Thursday, May 28, 2009. A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday. (AP Photo/Paul Sakuma)

Buying and selling foreclosed properties can be very profitable when dealing in real estate. Using real estate comps to guide you through the maze of REO’s available is wise. When a homeowner defaults on their loan, the bank repossesses the property and resells it. Banks make money on the loan but lose money when holding properties, so they are very eager to sell once they are forced to foreclose. This can be a great opportunity for investors.

The first step in buying foreclosed properties is to be prepared. You don’t have to do this alone. InvestorComps provides the data you need to research all your potential REO deals.

Once you have found a property that you like, make sure it’s really a good deal by ordering a professional home inspection. The best investments require simple cosmetic work to be ready for resale. Stay away from roof, foundation or piping problems. Look for properties that simply need new carpet, light landscaping, new countertops and paint. A local contractor can help you determine these costs.

If an REO is not selling quickly, a bank may consider a short-sale – which means buying the property for less than what was owed on it. Remember guys, banks are not in the real estate business. They want to sell REO’s as quickly as possible. They may initially try to sell at market value, but if it doesn’t sell after 30-60 days, they will lower the price. Guys, here’s your chance to take advantage of that timing! If it still doesn’t sell, negotiate a short-sale.


Another option to consider is buying houses in pre-foreclosure. Depending on the state laws, banks are required to give the homeowner a window of time to sell their home before the foreclosure sale. This time frame gives you an opportunity to contact the homeowner directly to purchase the property. In most cases, the homeowner is desperate to sell and may accept an offer for slightly over the amount of their loan. You can even help the homeowner by giving them enough to move on and repair their financial situation.

Any good real estate deal will sell quickly, especially foreclosures, so be prepared to move. You’ll be able to spot deals faster if you know the area’s housing market. Be sure to have your real estate team of professionals ready also, including title companies, appraisers, and lenders. Wishing you much success in your future investments!!

All the Best,


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