As the real estate market continues to slow down foreclosures are already reaching an all-time high. This is only going to get worse in the next couple of years and it’s all because of the real estate boom in the previous three to five years.
Why is this happening?
It’s because home buyers were spending more money on new properties than they can afford and because loan brokers and mortgage companies were allowing them to overextend themselves. These brokers (in my opinion) were taking advantage of home buyers by giving them great deals on 3-5 year ARM loans or interest-only loans which allowed them to buy bigger houses they couldn’t really afford. Brokers of course get paid commissions from lenders they match you up with but that’s a different story.
So what’s happening now?
All those 3-5 year ARM loans are now starting to adjust and homeowners are unable to cope with their mortgage increase and have to foreclose on the property. This is even more so true for homeowners who took out an interest-only loan. So in my opinion the next few years is going to be prime time to pick up deals on foreclosures. So what I am studying now is how to take advantage of this cycle in the real estate world by examining how to find houses in the pre-foreclosure stage. So pre-foreclosure real estate investing could mean lots of opportunity and moneymaking potential. At the same time, it requires that investors be on their toes and careful in their decision-making. It also takes a lot of time since real estate investments take longer to liquidate that and other investments meaning you cannot always get your money back quickly.
Pre-foreclosures are beneficial to the seller and to the buyer. It means the seller doesn’t have to go into foreclosure with the banks and their credit doesn’t get affected. The buyer essentially bails out the seller and takes over the property. The seller will most likely lose all equity built up (if any) and will have to sell their home usually at a discount which is all good news for the buyer.
I will talk more in detail as I learn about pre-foreclosure real estate. Once you understand the foreclosure process, you can take advantage of a situation that you did not create and one in which the homeowner cannot fix. It will allow you to build a wealthy future for yourself by investing in this type of real estate.