In Part 1 we discussed the different stages of a foreclosure which could result in buying opportunities. Here we explore the different opportunities and risks involved in each stage.
Today's buyers seem to be more focused on the short-term goal of "getting a deal" rather than on the long-term lifestyle improvement and savings goal of home ownership. However, in the "frenzy" created by the media about buying foreclosure homes, there are some serious pitfalls that should be considered that may result in unforeseen challenges for the average buyer.
1. Pre-foreclosure (Short Sales). In my opinion, one of the best avenues to find well-priced properties in reasonably good condition.
2. Foreclosure: If you are an experienced and savvy investor, buying homes at the public auction may be provide some bargain opportunities if a) the lender does not buy the property back; b) If the owners have substantial equity; or c) If the lien holder precipitating the auction is a deceased estate or the IRS.
3. Post-foreclosure (REO, lender-owned). Depending on the circumstances, these properties may provide interesting buying opportunities.
While there are clear buying opportunities out there to purchase properties whose sellers are in distress, I recommend caution. Don't judge a book by its cover! Consult with your REALTOR and ask about potential risks and rewards before you buy!
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