Any rookie home investor can easily find books, many of them actually, that would assure them of becoming successful home investors in no time. Here is what you should know ? almost all transactions that promise easy money turn out to be a scam.



Some people get rich through investing on foreclosure properties indeed, but it is important to take note that making profit from real estate requires much knowledge and experience, not to mention investing resources such as time and money. Also, just like in any other business that promises big profit, investing on real estate, particularly on foreclosed homes, entails risk.

The first step for any beginner planning to invest on foreclosed properties is to understand the foreclosure process. Foreclosure happens when homeowners fail to make their monthly payments. Their lenders take the properties and resell them in order to get the money that has not been paid by homeowners.

Aside from defaulting on mortgage payments, there are other possible reasons for foreclosure. Some of them are:

?Failure to pay property taxes

?Lack of necessary insurance

?Balloon payment on adjustable rate mortgage

?Failure to maintain the good condition of a property

The foreclosure process has three major stages:

1.Pre-foreclosure is the first stage in a foreclosure process. It is the period in between the homeowner defaulting on payments and the bank putting up the property on sale. Pre-foreclosure is one of the best opportunities for investors to work on their transactions as they can negotiate directly with the homeowner.

2.Auction is the second stage in a foreclosure process. The property is taken possession of and put on sale during this stage. This is the time for home investors to top the bid as the best properties are granted to the highest bidders.

3.The final stage in foreclosure is when real estate becomes owned by the bank, also known as REO. This happens when the property does not sell during the auction or when the lender turns out to win the bidding. Banks usually sell REO homes on the open market.

There are times when government agencies like the Department of Housing and Urban Development conduct the auction. Most of the time, government auctions take place on the Internet. Buyers are allowed to check the properties in advance. One disadvantage of a government auction is that there is only a limited number of properties. This means that many bidders compete over the same foreclosed properties resulting to only little discount on market price.