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When investing in foreclosures, understanding the lifecycles and different types of foreclosures—as well as knowing which type is hot at the moment and why—is crucial to choosing the right time to buy to maximize the potential of your investment and reduce risk. Within the circle of foreclosures there are three basic categories to recognize: buying before the foreclosure auction, buying homes directly at the auction and buying from the bank or auction after the auction is over. These bank-owned properties are referred to as real estate owned (REOs). Let us take a look at each of these types of foreclosure so that you can focus on the best segment of the foreclosure market.
Buying before the auction
When home owners are having trouble but are not yet foreclosed on, the property can be sold before auction. Such distressed properties include those from the multiple listing service (MLS), short sales, notice of defaults (NODs) and notice of trustee’s sales (NOTS). Because of the excess inventory of existing foreclosures on the market, the restriction of lending and the anxiety of home owners and investors willing to sit on the sidelines till something breaks, this could be one of the worst times ever to sell a house retail. Many sellers cannot compete against foreclosures, so unless they too enter foreclosure they have no viable way to sell their home for a fair price. This means that investors have no way to buy a home with equity in it at this stage of the foreclosure process. However, short sales are worth discussing.
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Author: Glenn Plantone
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