Investing in Foreclosures Benefits Everyone

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Author: Colin Egbert

Investing in foreclosures can be very profitable, especially if you get that property while it’s still in pre-foreclosure. There are great benefits to investing in pre-foreclosures through methods like bank short sales and later on going to sheriff’s sales to pick up the foreclosure properties. In a way you are benefiting from the homeowner's loss and many an unscrupulous person involved in real estate investing has even taken advantage of the homeowner’s predicament, giving foreclosure investing a bad reputation.
However, most investors involved in bank short sales benefit in the way that the Goodwill stores benefit from donations. The investor buys the property that the homeowner is having trouble paying the mortgage on. This is the same property that banks just don’t want to hold onto. The investor then resells it to interested buyers, with a bit of a profit so the investor can continue working and saving for their own future. There are benefits for all parties involved in these properly arranged pre-foreclosures deals.
It’s Good for the Banks
The banks also benefit from short sale investing. They don’t want to hold onto that property as any defaulted property is considered a non-performing asset on the bank’s books and affects their lending ratio. So just getting the property sold is a benefit for the bank.

• Frees up Money
  As mentioned above the banks must reserve enough money to cover the loan. If they can’t use that money that’s less money they have to invest for their own profits. Selling the property or mortgage short sale allows them to free up their reserve money for investment.
  
• Mortgage isn’t Just Sitting there Anymore
  When the bank has a property mortgage in default they are required to reserve enough cash to cover that loan should the foreclosure go through and they aren’t able to recover their loan. Some banks may even keep as much as 8 times the loan in reserve. They can’t use that money as long as the mortgage is in default.
  
• Saves Fees and Effort in Foreclosure Process
  

  By taking over the effort involved in putting together a short sale deal you’ll end up saving the bank a lot of effort in completing the foreclosure and managing the property if it doesn’t sell at the sheriff’s auction.
  

• Protect equity built up in the home
  If a home is ultimately foreclosed upon, the homeowner will lose any equity they've built up in it. The investor may be able to recover some of the equity that the homeowner has accrued in the property and even prevent the foreclosure.
  
• Protect their credit
  If they work with an investor, it might be possible to stop the foreclosure. This also means that they can start rebuilding their credit profile or at least stop it from deteriorating further. This is especially important because your credit rating affects everything from credit card rates, to property insurance rates, to buying a car or even finding employment.
  
• A Chance to Move On
  If the foreclosure is stopped, the homeowner can at least breathe a sigh of relief and begin rebuilding their financial and home life. Being under threat of foreclosure is one of the most significant strains one can face. It can affect everything from mental state to job performance, as well as decision-making.
  

• Motivated Sellers
  

  It’s heart-breaking to see, but most homeowners with defaulted properties are very motivated sellers. By the time their bank files for foreclosure, the homeowner usually just wants to walk away from the property without fear of what will happen to their credit. Plus, you’ll be able to negotiate a great price on bank short sales because the bank just doesn’t want to own a property. They want to liquidate their assets and get out while they can too.
  

• Large Profits
  As an investor there has to be a profit involved or you will not benefit from this process yourself. You can purchase the property from the seller at a discount. Short sales tips always involve negotiating a good deal, but that’s not hard when the bank is willing to sell the property at below market value because they'll see that is to their advantage to cut their losses. When you rent or resale that property you can sell it for current market value and make a great return from investing in foreclosures.
  
• Selling in a Niche Market
  These properties are often less desirable than properties being marketed by real estate agents and they are cheaper. Plus, if you get into pre-foreclosures you’ll have less competition for picking up cheap property. You’ll be catching those properties before they get to the sheriff’s sale. You’ll have an easier time with your real estate investing if you start out with foreclosure properties.
  In the end investing in foreclosures provides benefits for everyone, all around the table. The homeowner gets a load off their shoulders, you’ll pick up a discounted property and the bank gets to improve their lending ratios. This is all because you decided to step in and help out with short sale investing.

  Colin Egbert is an experienced Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He's the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

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