In this current real estate crisis, many people are loosing their homes either because they can’t make the payments or are walking away because their house is worth less then the amount owed. It was reported by CNBC on July 24 that foreclosures now represent half of all the homes sold in the US. Although this is downright scary to a highly leveraged homeowner or speculator this is also an opportunity of a lifetime for anyone looking to buy real estate at these depressed prices.
Most real estate investors see this current crisis as an opportunity as it’s the perfect time to buy cheap and hold until the market returns to normal. “There are always opportunities”, explains Donald Trump. “When I first started out in Manhattan, everyone was saying what a terrible market it was”. It’s a good thing he didn’t listen to anyone else’s advice or he won’t be where he is today.
Many of the most successful real estate investors currently see this as an opportune time to buy real estate (Mr. Trump is in this list) and see pre-foreclosures as the greatest means in which to negotiate the best deals.
The main reason to consider buying a pre-foreclosed property rather then waiting until in becomes a foreclosure property is because that way you can buy it from the current owner. This will give you more time to inspect the home as well as developing a mortgage with the bank.
There are macro (local community, etc.) and micro aspects to take into consideration when looking for a pre-foreclosed home. Here are the some of the macro aspects:
- Do you notice an extremely unbalanced number of foreclosures available in the area? It’s preferred that your pre-foreclosure deal is the only one in the neighborhood.
- Ask around to find out what the average rate for rent is in the neighborhood and if it has changed lately. This will indicate if local housing demand is on the rise or not.
- How strong is the economy at the town and county levels? Is the current employment rate growing or stagnating?
- Check with local authorities to become informed about any infrastructure projects that may be planned within the next two or three years. Things such as new buildings and highways being built or corporations moving into town can be a positive indication of future growth.
- What are the demographics? If there is an extremely high level of seniors in town and only a small percentage living in nursing homes, guess what, it could cause a housing surplus within 10 years or so.
If you do your homework and find the majority of these answers to portray a positive community, then you should consider buying in that area. Buying pre-foreclosed homes at the right time in the right place can prove to be a very profitable venture.
