How to Profit from Foreclosed Properies and Bank Owned Real Estate

Profit From the Foreclosed Real Estate Cycle

Posted on October 11, 2009
Filed Under Foreclosures, Investing | Leave a Comment

Real estate has always been one of the top 3 potential investments of any serious investor with money to spend. A typical middle class investor has never been able to make a substantial profit off of selling homes for many reasons. Lack of time and lack of funds are two of the main reasons that regular people don’t usually make a fortune off of real estate.

Any of the following makes you a prime candidate for investing in the foreclosure bank owned real estate market.

Not enough time to start and manage a complex business full-time.
You have a low start-up budget for purchasing real estate.
You have a desire to refurbish run-down homes.
You want to establish a home rental business.
You want to pick up a smaller, cheaper property to live in.
You have time to check out the Foreclosure Plan you can use to maximize wealth by purchasing bank owned properties.

Why is the housing market saturated with foreclosed properties?

The root causes of many of our housing problems include declining housing prices and the fear of further declines. Once this happens home buyers delay purchases, thus decreasing housing demand, thereby causing some homeowners to stop making payments. This is especially true if they believe that the mortgage balance is worth more than their home. Foreclosures increase, adding to the supply of homes for sale. Because of the low prices, lenders are forced to tighten underwriting guidelines, which further weakens demand by discouraging some potential home buyers.

This cycle will be difficult to break. As we have seen throughout history, buyer flock to a weak market that is at it’s lowest point. Buy low and sell high is the mantra of many successful investors. In a culture where people want to pay less for homes, this kind of market is an opportunity to buy very inexpensive properties from the banks who just want to recover some fraction of the home’s assessed value.

Why do homeowners foreclose?

The story of a factory worker…

A factory worker once made around $2,250 per month.
He bought a $196,000 house with nearly 100% financing.
He lost his job and fell way behind on mortgage payments.
He finally obtained another job at around $1,600 per month.
Even if his loan was modified to a 5% rate and 40-year term, he could not afford the payment of at least $1,200 per month.
His home is now worth $20,000 less than the mortgage balance.

Our factory worker cannot qualify for a forbearance plan because he does not have enough income to make the extra payments necessary to catch up. Because of his lower income and house value, a refinance is out of the question. Two selling options include turning in the keys to the lender under a “deed-in-lieu of foreclosure” agreement, or selling the house with the understanding that the lender will accept a short sale. As a final grasp at saving, our worker might stop making mortgage payments altogether, and stay in the house rent free as long as possible. In this case, a foreclosure and eviction will ensue.

Many of these types of borrowers made little or no down payment, and due to falling house prices are now upside-down on their mortgage. Some overstated their income or net assets in the original loan agreement and now can’t afford the mortgage payments.

Other homeowners can afford their mortgage payments but have decided to stop paying because they have no equity in the home. Some might even strip the house of its value by removing appliances and allowing it and the surrounding property to fall into disrepair, as there’s no incentive to invest while they wait to be evicted.

How can we capitalize on the foreclosure market?

By getting ourselves educated about the foreclosure marketplace, we will better understand how to buy and sell bank owned properties. Then we’ll need to come up with lists of properties that we can visit and have assessed for value after repairs are complete. You can get all that by clicking on one of our banners and signing up for the Foreclosure Plan.

This is a program that you can count on as a full educational resource for investing in back own properties. Give it a try and make your fortune in the real estate foreclosure market.