Real estate investing is ultimately the fastest and safest way to create lasting financial security. Buying foreclosure homes has always been most profitable real estate investment. Consider bank foreclosures and government foreclosure homes for sale for profitable real estate investment.

Types of foreclosure homes for sale

Real Estate Owned (REO) by banks and government agencies
Default pre-foreclosures
Foreclosure property auction sales

Bank foreclosure homes for sale

When homeowner or mortgage loan borrower fails to make three consecutive installment payments the lender is legally entitled to require the borrower to pay off the entire principal unpaid balance.

Advantages of bank foreclosures: Banks take care of eviction, property taxes, and other obligations. There is no home mortgage loan to payoff. You get a clear title as the bank wipes out all liens when it buys the property at the auction. Banks usually satisfy the outstanding liens and judgments before selling it to you. This is a major advantage over other real estate auctions.

Be prepared to negotiate with the bank by exchanging offers and counter-offers. Banks do not like to act like a landlord, it is not what they are supposed to do. Bank owned property is a burden on the bank. Banks want to quickly discard such real estate properties that are subject to vandalism.

Don't forget to ask for financing from the same bank. Bank may speed up the process to get rid of the property fast by making the terms favorable for you.

Bank foreclosed or bank owned properties are sold "as is" as banks do not get involved in repairing or fixing real estate. Include "subject to inspection" clause in your agreement so that you can renegotiate the price if you find unexpected damages or defects upon inspection.

Government (HUD, VA) foreclosure homes for sale

HUD (U.S. Department of Housing and Urban Development) and VA (U.S. Department of Veteran Affairs) are the top two sources of government foreclosure homes.

HUD acquires homes as a result of foreclosure on a FHA-insured mortgage loan. VA acquires houses upon foreclosing on VA guaranteed home mortgage loan.

You can own a government owned home to live in, lease, or sell for quick profit. HUD foreclosures and VA foreclosures are offered to general public through professional real estate agents who specialize in government foreclosed homes.

Other government foreclosure sales are made by: FDIC (Federal Deposit Insurance Corporation), IRS (Internal Revenue Service), GSA (U.S. General Services Administration), SBA (Small Business Administration), Fannie Mae, Freddie Mac, U.S. Army Corps of Engineers, county taxation departments, Sheriff offices, and many other government agencies.

Foreclosures experienced a startling rise this year - up 72 percent since the beginning of 2005, according to RealtyTrac.

How can you find default pre-foreclosures for sale?

Lis Pendens (notice showing a legal action is filed and pending) are documents posted in county and city courthouse buildings listing home owners who cannot pay their monthly mortgage installments and taxes. Some people call these properties probate houses.

How much time do you have before foreclosure auction?

You can act to make an agreement from the listing day until the property is offered for sale at auction. This may take about 90-120 days in different states.

Expand your knowledge about foreclosure home for sale by banks and government agencies

Make yourself familiar with foreclosure law and foreclosure procedures in different states and foreclosure glossary of terms used to understand and negotiate foreclosure better.

Agreement before foreclosure process has advantages for all parties

Lender and the home owner are motivated to resolve the default situation. Pre-foreclosures offer an excellent opportunity to make all parties happy.

You "quit claim" the property and take over the mortgage payments. Now, you own a real estate property much below market prices.
Previous owner is relieved of his/her debt and stays sound financially. You are helping the troubled homeowner.
Bank is happy to have a new borrower who is in better financial status. You rescued the mortgage loan.

What can you do before foreclosure starts?

Find Lis Pendens and locate mortgage loans in default.
Contact homeowner and bank.
Find out what homeowner and bank need and assess their motivation.
Obtain information on prices of similar houses in the neighborhood to determine the price that you will offer after calculating the closing costs and your profit.

Foreclosure property auction sales

Reasons for foreclosure auctions:

Failure to make home mortgage installment payments.
Failure to pay real estate property taxes, assessments, personal bankruptcy, illegal activities by owners, etc.

Foreclosure process comes to the auction stage faster in non-judicial foreclosure states. Auctioned foreclosure properties are "where-is" and "as is." Foreclosures are generally auctioned off at the county courthouses.

Foreclosure auction methods

There are three types of auction methods:

Absolute foreclosure auction: Foreclosure property is sold to the highest bidder, regardless of the price. More auctioneers favor this method as it attracts more bidders.
Minimum bid foreclosure auction: Only bids above the minimum are accepted. This reduces the risk for seller guaranteeing a certain price.
Reserve foreclosure auction: Seller reserves the option of accepting the highest bid within a certain time period.

You are expected to present 10 percent cash, cashier's check, money order, or other certified funds at the time of bidding. You must pay the balance in 30 days.

Types of foreclosure properties offered for sale

Single family homes, condos, town homes, multi-family units, rental and income properties, office buildings, commercial property, industrial and agricultural real estate.

Inspect, repair, and improve your foreclosure home for better value

Inspection of foreclosures is critical in home buying decisions and gives you bargaining power to negotiate a better price.

Make a checklist to inspect physical features of real estate property and appliances. Pay special attention to foundation and roof of the house during home inspection by yourself or by a professional inspector. Review this section for practical home inspection ideas.

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