How to Make Money from House Foreclosures
Making money from house foreclosures is certainly not for beginners. However, if you want to dive into this market, you can start learning the ins and outs quickly.
In this article, we’ll talk about how you can make money from house foreclosures. You’ll learn the foreclosure process and the important considerations involved.
What are House Foreclosures?
House foreclosure is a legal process where a lender tries to recover their money on a loan by owning and selling a property.
The actual foreclosure, however, is just the last step of the lengthy pre foreclosure process. The lender may also offer some alternatives to foreclosure.
Now that you know the process, what can you do to make money off of it?
Know the Legal Owner
Research the legal owner of the house and contact the lender via any method available. You may need to check with your tax collector’s office to find information on the owner of the house.
Once you get in touch with the bank or lender, ask for the asset manager in charge of the property, who may refer you to the real estate agent handling the sale.
Check the Property
Know the value of the property by asking the real estate agent to perform a comparative market analysis. Inspect the house with your trusted home inspector.
After you inspect everything, consider the cost of bringing the house to a liveable standard. Account for the costs of all the repairs the inspector may suggest.
Make the Offer
After considering the costs and expenses, determine the price you want to pay based on analysis and the house’s time in the market.
Make a formal offer on the house using the proper forms. You will have to supply statements proving you have the money available, or proof of funds.
Wait for the lender to accept your offer and assign it to the title company. Ask for a quick closing and work closely with the company’s reps to fast-track closing details.
Once the property is yours, start the marketing efforts and find good tenants or prospective buyers. It pays to have a good lawyer to look after legal documents.
Now, here are some important things you should consider when undergoing this process.
Be Wary of Bad Loans
Bad loans don’t disappear when owners sell their properties. If the bank doesn’t own the property (it did not go through foreclosure auction), the outstanding liens and fees are transferred to the new owner — you. Make sure the property has a clean title.
Foreclosure Processes Vary by State
Foreclosure processes differ for each state. The differences include:
• The notices a lender must inform the public about
• The homeowner’s options for bringing the loan current
• The timeline and process for selling the property.
In Florida, Illinois, and New York, along with 19 other states, judicial foreclosure is most common. The other states mainly use non-judicial foreclosure or the power of sale.
The average time it takes to foreclose properties also vary by state. For instance, states with the longest number of days to foreclose include:
• Hawaii (1,673 days)
• Indiana (1,361 days)
• Louisiana (1,243 days)
Meanwhile, the states with the shortest average include:
• Arkansas (157 days)
• Wyoming (172 days)
• New Hampshire (184 days)
As a result, it’s wise to try to make money off of the foreclosed property as soon as you buy it.
A Long but Worthwhile Investment
Making money from house foreclosure is a worthwhile investment. However, it usually takes a while to see excellent results, so it’s not a get-rich-quick way to build wealth.
Also, if you don’t keep up with market trends and shifts in demand, you might suffer losses.
Overall, those who have made a fortune in the foreclosure market have invested resources, time, and energy learning the trade before being successful. You should, too.