Two kinds of foreclosures

If you’re an aspiring real estate investor, it is crucial to know that
there are two kinds of “foreclosures” and to understand the difference
between them.

When a home is initially foreclosed by the lender,
its put up for sale at the monthly foreclosure auction at the county
courthouse. This is what I refer to as “level 1 foreclosures”. In a nutshell, here is what you need to know about level 1 foreclosures.

1. To
   purchase a property at the foreclosure auction you must have the entire
   purchase price available in cash or cash equivalents (cashier checks).
   Therefore, you cannot leverage the purchase of a level 1 foreclosure
   through financing.
2. You do not get title insurance when you
   purchase a property at the auction. That means, you could inherit tax
   liens, mechanics liens and other clouts on the title from the previous
   owner.
3. You cannot inspect the property prior to purchasing it.
   Given that these properties are occupied by the previous owner, you
   cannot get access to the property to inspect it accordingly.
4. You
   can purchase property at incredible discounts at these auctions.
   However, the competition is fierce and an incredible amount of research
   is required to sort through the huge list of properties being
   foreclosed to identify the good deals.

Being that the
investors participating in these auctions are strictly using their
liquid capital, they focus solely on the deals with the highest level
of discount (20-40 cents on the dollar). And if you think about it,
wouldn’t you? As such, many good deals (at 60-70 cents on the dollar)
don’t get picked up at the auction and are taken back by the bank under
the authority of the bank’s asset manager. But banks are not in the
business of owning real estate. Instead, they are in the business of
making loans and collecting payments. So when they get a property, they
are interested in liquidating (selling) that property so they can free
up the capital tied up in it.

When a bank owned property gets put up for sale, we have what I call level 2 foreclosures, otherwise known as bank homes or REOs. In a nutshell, here is what you need to know about bank homes.

1. Bank
   homes can be purchased just like regular homes: They can be inspected;
   you get about 30 days to close; you can finance up to 90%; you get
   clear title and title insurance.
2. There are many good deals
   to be had in this market. However, there are many bad ones as well. If
   you’re going to invest with consistency and confidence you need a
   capable real estate company like Signature Real Estate,
   to help you identify the good deals, identify them early so you have a
   chance to actually acquire them, and point you in the right direction
   when it comes to rehabbing and reselling or releasing.

If you would like to see what’s available in the Houston area check out our Houston Bank Foreclosures page and lets talk about getting you on the right track to invest with confidence.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.