Friday, January 25, 2008

What's the difference between Preforeclosures and Foreclosed Homes?

Foreclosures are common place in our world today. With the mortgage crisis of 2007, and declining home prices where many people bought homes they couldn't afford based on speculation that the value would increase so much it would be a great investment.

There are also loads of get rich quick foreclosure schemes. These don't work. Foreclosure homes can be purchased, and at a discount, but you likely won't get them for pennies on the dollar or even half off. To know how to get deals on foreclosure properties you need to understand the different types of foreclosure properties: Preforeclosures, Foreclosure Auctions, and Foreclosed Homes.

Pre-foreclosures


Preforeclosures are homes in distress. Borrowers have missed payments and the loan is in default. It is these types of houses that, investors get the best deals on. However, the tricky thing is that these properties aren't usually for sale. Real Estate investors contact these owners directly to work out a deal to prevent the foreclosure.

Foreclosure Auctions


This is where the foreclosure takes place. This is a public auction where anyone can bid. Sometimes these houses can be purchased for great deals, but somethimes the starting auction price is more than the property is worth. These are risky purchases as many investors purchase houses at foreclosure auctions without even seeing them.

Foreclosed Houses


Foreclosed houses are those properties that don't get picked up at the foreclosure auction. The bank buys them back and then sells them. Banks want to get rid of homes quickly, but these properties will be sold near market value. They are always listed by Realtors, and are rarely sold for less than 5-10% of market value. These properties are referred to as REO homes, HUD Homes, and bank owned properties.

9 comments:

Dick Weiss said...

Getting people clear on the various stages of foreclosure is very important. Thank you.

If they want to learn more about foreclosure investing they can check out my blog at http:www.shortclosures.com or subscribe to my Free Newsletter at http://www.whoisdickweiss.com

Dick Weiss said...

Getting people clear on the various stages of foreclosure is very important. Thank you.

If they want to learn more about foreclosure investing they can check out my blog at http:www.shortclosures.com or subscribe to my Free Newsletter at http://www.whoisdickweiss.com

Ethan said...

Thanks for the forclosure info Alan.

Utah Houses said...

Foreclosures are overated. They're usually more risk than they're worth.

Michael said...

Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location.
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Michael
Foreclosures

Lafayette Colorado homes for sale said...

Great differentiation. Certainly, one must understand the difference between the two to avoid confusion especially if one is in the real estate industry.


-Audrey

louisville ky apartments said...

Quick information about foreclosure yet very informative. Thanks for sharing.

-brian

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