Flipping Foreclosures | Know The Essentials To Making A Profit
A quick way to earn a considerable amount of profit in today’s economy is by Flipping Foreclosures.
As you probably know, a foreclosure happens when the owner of a home fails to make their mortgage payments, resulting in the lender (usually a bank) to repossess the property. While the process is often tragic for the previous homeowner, flipping foreclosures can be a great way for you to make money.
You can often buy these properties at a price well below market value, so they have an amazing possibility to earn you a great deal of profit.
While flipping foreclosures can potentially be a great business investment, there is always a substantial amount of unpredictability. Unlike regular real estate properties, foreclosed homes are not prepared by the owner to be sold. Often times you will find these foreclosed properties in a worse condition than other properties, and still full of the unwanted items of the previous owner. Make sure you know what you are doing, and follow the proper steps before you being flipping foreclosures.
Buying At An Auction
Your first step to buying a foreclosed property at an auction is to do your homework. Look for foreclosures in your area by contacting your town or country courthouse, looking in the newspaper for upcoming listings, or by contacting the mortgage companies that are selling the property. Another useful tool is the U.S. Department of Housing and Urban Development’s official website, where information about foreclosure auctions can be found.
Assess The Property
You’ll want to visit the property in person to see what kind of condition it is in. But remember, you will not be allowed access to the inside of the house before you buy it, so there is considerable risk involved. You will not be able to factor in the cost of repairs in advance (other than the exterior ones) to see if the property will make you money.
A good way to determine potential interior problems is by talking to the neighbors that live around the house. By doing this, you might be able to gauge if there will be any substantial damages that you might not have been expecting. For example, if the neighbors tell you that the previous owner had a collection of dozens upon dozens of cats, then you can expect that there might be some animal damage to the interior.
Decide How High You Are Willing To Bid
In addition to looking in person, you should research comparable homes in the neighborhood that have recently been sold. That way, you can gauge what the market value and after repair value will be of the property to make sure you don’t bid too high at the auction.
At the auction, never bid more than a predetermined price that you’ve decided on. Don’t let emotion get in the way and lose money on the flip. There are always plenty of fish in the sea.
Buying An REO Property
An REO, or “real estate owned”, property is a house that is unsuccessfully sold at the real estate auction, and therefore in the possession of the lender.
The lender, usually a bank, looses money on the home the longer it remains unsold. Things like insurance, utilities and other general maintenance costs are all persuaders for the lender to get the property off of their hands as quickly as possible. This is great news for you, the buyer. The lender will usually sell the house for well under the market value, even lower than they did at the foreclosure auction.
If you do decide to buy an REO, there are a few precautions you should be aware of before making a final purchase. The most important of these is that banks do not know the condition of the property they own. Because of this, you should always make sure that you get the property inspected by a professional before buying it.
Are Flipping Foreclosures A Thing Of The Past?
Since the financial recession in 2008, the foreclosure market has been a hot area for house flippers. Unfortunately, small time people in real estate like you aren’t the only ones who have their eye on flipping foreclosures.
A recent trend has shown that big hedge funds have been buying up foreclosed properties in bulk. These hedge funds have millions if not billions of dollars at their disposal to eat up a large chunk of foreclosed homes on the market.
While this can be detrimental to your cause, it doesn’t mean it is impossible to find foreclosures to flip. Just make sure you wait for the right property to purchase. Just because there are not any others available, doesn’t mean you should purchase a foreclosed house that you aren’t going to make money on. If you give it some time and look in the right places, you should eventually be able to find a great deal.