The Real Estate Encyclopedia
Foreclosure Investments_ What You Need to Know
Category - Mortgage Questions - Foreclosure & REO FAQ's

There will always be plenty of foreclosures on the market across the country. Though the rate of foreclosures has been dropping annually for the past few years, foreclosed homes are in no danger of becoming extinct.

Most of these homes are priced below market value, making them a smart buy. But with great buying power, comes great responsibility.  Hereís what you should know before making the big investment.

Know What You Want

Before making any offers, set a baseline for what you want in a residential property. Include what you cannot live without. This decision will be influenced by your intention for the property. If you are planning to flip the house and make a profit, you might be in the market for a residence thatís more of a project.

If you are buying a home as a rental, it might be wise to look for houses with multiple bedrooms to accommodate more renters. If purchasing a house to live in and your spouse wants their own bathroom sink, your real estate search should accommodate that. Knowing what you want will help guide your search and you will know which properties to look at and which to avoid. 

Know Your Investment Cap

Itís easy to get caught up in making offers and counter-offers, so know how much money you are willing to invest before playing the game. Though the market can be hard to predict, you should also assess the current value of the property and its potential for profitability over time.

A house you are looking to flip in three months will put you in a much different market value range than one you intend to rent out for three years before selling. Here is a helpful resource to help you estimate the market value of a home.

Know Your Source

While purchasing a foreclosure can be a savvy financial investment, make sure youíre investing through a reputable source. Times are a-changing in the real estate market and nowadays itís not necessary to go directly through a realtor to purchase a home.

Instead, there are real estate sites online that allow you to bid on houses from the comfort of your own sofa. While sites like are credible, trustworthy and established, other sites selling homes via online auctions may be less reputable or just too fresh to trust. Itís prudent to beware of any retailer (internet or otherwise), but consider that thousands of folks just like you bid and buy homes on the internet every month.  

Know Your Skill Level

More important, perhaps, than what you want in a home is what you can work with. If you arenít a very good handyman, or just lack real estate experience and confidence, be realistic by looking for houses within your working abilities. Housing projects can be great ways to learn valuable, practical skills, but donít get in over your head and saddle yourself with projects that will cost you more than you bargained for. 

Mortgage Questions - Foreclosure & REO FAQ's
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