Why “Foreclosures” May Not Be a Good Deal

June 14, 2008

Many real estate web sites and foreclosure database advertisements promote that their “foreclosure” list is the way to buy investment properties in the current market. Buyer beware! The word “foreclosure” does not suggest a real value, a potential for profit, or a good investment.

The Foreclosure lists that are sold by many online real estate databases and foreclosure publishing companies are an inaccurate source of investment opportunities for 3 main reasons:

1. Many Home Owners in foreclosure owe the bank and other liens (tax liens, child support, lawsuits) more than the house is worth, more often than not, there is very little or NO investment equity for an investor to buy into.

2. The real estate foreclosure lists are compiled based on only one criteria; Properties in Default. The notice of Default is only the first step of a four month process. Nothing in these real estate foreclosure lists guarantee that the property is for sale by the owner or that the owner is even interested in entertaining an offer or answering the door. There is a great potential for the investor to spend a lot of time evaluating real estate investment properties that may very well not even be for sale.

3. There is no basis provided to sort, filter or otherwise evaluate the properties by investment equity, real estate value or any other real estate profit determining value. Again, there is great potential for the Investor to spend a lot of time evaluating real estate investment properties that may very well have no equity or profit potential in them at all.

So how do I find a real estate foreclosure investment?

Consult a real estate professional, such as a realtor or seasoned investor. Discuss their real estate investment knowledge and background. Find out what they know about investing in real estate, buying foreclosures, buying fixer uppers, flipping real estate for profit, or just plain making money in real estate investments. If you do not know any, your best bet is to join a real estate investment based web site which exclusively advertises under-value, discount real estate investment properties for sale and promotes a select few qualified real estate agents and other real estate business professionals that will help you through your real estate investment. Look for web sites that compare asking price to market value so that you can easily determine the equity spread. Make sure it is a real estate sales site and not a Notice of Default publication (these homes are not for sale). And look for a FREE trial so that you can experience the product before you pay.

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