Pre-Foreclosure Investing – Finding the Window of Opportunity to Profit
When we hear the word foreclosure we have mental images of families being booted out of their homes by evil financial institutions, with this picture not being too far from the truth. Although this example is a unhappy one, there is a bright side with foreclosures and money to be made for smart investors. Unfortunately, loan defaults by homeowners are a part of the housing market as is the home buying segment. Market conditions fluctuate determining winners and losers not unlike the stock market.
An underlying fact, unique to the free market, is when someone loses there is also a winner. Foreclosure investing is booming. In May, 2010, the government reported a record high of over 93,000 houses being repossessed by lending institutions, up 1% from the previous month and up 44% from the same time period one year earlier. These homes will be put to auctions and sold to the highest bidder. What if there were a way to buy these homes in pre-foreclosure, before they hit the auction block?
Real estate investors that take the initiative and possess the ability to work fast can profit in this time sensitive market. Another perk associated with this type of investing is the investor can very well help the struggling homeowner that is about to lose their home to the bank. No, you can’t keep them in the home but you can save their credit rating and help them avoid the sting of foreclosure being stamped on their credit report.
The difficult part of pre-foreclosure investing is the small window of opportunity. When the homeowner defaults on the loan, there is only a small window of time for the investor to approach the homeowner between default and foreclosure. Contacting the homeowner can be difficult especially since they are probably experiencing the most stressful time of their life. However, offering them an opportunity to save their credit rating and avoiding the sigma of foreclosure is a powerful selling tool if employed properly by the investor.
The benefit for the investor is he potential to buy a property for up to thirty-percent off market value. Once possession of the property is taken over by the investor he has several options. Keep the property as long term investment and rent it out or flip the property quickly and bank a nice profit. Whatever the choice, the investor can make a nice income with pre-foreclosure investing.