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Foreclosures – Hardship for Some, Huge Opportunity for Others
By Vic Hurlstorm | July 4, 2009
A lot of millionaires made their fortunes investing in real estate. The old adage “buy low and sell high” is what a lot of real estate investors live by. I’ve heard a number of different real estate investors say that you make money in real estate not when you sell it, but when you buy it. This simply means that if you buy at a good price you are just about guaranteed to make a good profit.
A great way for savvy investors to practice the buy low sell high method is to invest in foreclosures. Foreclosures are at an all-time high in this creates enormous opportunities for investors to get quality properties at bargain prices.
A lot of real estate investors like to look at a bank foreclosure list and see what kind of inventory their local banks are trying to unload. When most people need to get a loan to buy a house they go to a bank so naturally banks would have a certain number of people default on their loans in the banks would then have a large number of houses that they need to sell. Banks are not in the real estate business. They don’t want to get into flipping houses or owning rental properties. Banks want to have a portfolio of good loans, loans in which people make regular payments. Because banks want to have a solid portfolio of good loans on the books and because there are more foreclosures than ever, many banks are willing to accept short sales. This means that a bank is willing to accept an offer for less than what is actually owed on the house.
Another way that investors like to find bargain properties is to look for government foreclosed homes. Banks are not the only institutions that make real estate loans. The Veterans Administration makes financing available to men and women who have served in the armed forces so that they can purchase homes, often with little down payment money and favorable interest rates. Like other lenders, the Veterans Administration has people that default on their loans from time to time and they will take houses back in foreclosure.
The Veterans Administration is not the only government agency that ends up with foreclosures. A lot of investors like to buy HUD foreclosures. HUD stands for the Department of Housing and Urban Development. The Department of Housing and Urban Development does not make loans directly but they are responsible for overseeing the activities of the FHA or Federal Housing Administration which provides mortgage insurance to approved lenders. If someone has a bank loan that is insured by the FHA and that person then defaults on their loan, and if the property were to go through the entire foreclosure process it would eventually go back to the Department of Housing and Urban Development which would then have the responsibility of selling that house to recoup losses.
The Department of Housing and Urban Development ends up with a lot of foreclosures because the FHA insured loans are usually made with very little down payment money and a lot more flexibility when it comes to buyers qualifying for a loan. The FHA makes buying a home easier for a lot of people but this also makes it easier for people to get in over their heads and lose their homes in foreclosure.
Times are tough for a lot of people and foreclosures are at an all-time high but if you are an investor now is the time to buy. There is more opportunity now than ever before to get quality properties at rock-bottom prices and real estate prices will not stay this low forever. This is one of the best times in history to buy low and sell high.
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