Inexpensive properties often make it possible to increase your real estate investment portfolio. The thought of buying houses and land at great prices can be intriguing. There are several ways to buy properties at deep discounts. As long as you take a few precautions, the search could be lucrative and fun.
Look for tax sales. You can search for these sales in the county of your choice. Many county tax sales are held online. If you are the highest bidder, the county will give you a tax lien or deed. After the redemption period expires, you have to foreclose to own the property.
Find short sales. Short sales are an alternative to foreclosure. The homeowner agrees to sell the house and leave. The bank agrees to accept as full payment less than it is owed. You can find these properties by looking for distressed homeowners, or real estate agents specializing in this area. You make an offer on the property, and wait for the bank to accept it. These transactions can often take several months to close.
Buy a foreclosure at auction. Auction sales are usually held monthly. You can get a list of the properties from your county courthouse. The bank makes the opening bid for what is owed. Your bid needs to be more than the bank's bid, yet less than the market value of the property.
Buy direct from the bank. All properties purchase by the bank at auction become known as real estate owned, or REO. Eventually the bank will list these properties, usually after the redemption period expires. Find a real estate agent skilled in REO to help you make an offer. Banks do not hold themselves to deadlines, so be prepared to wait several weeks for a response to your offer.
Purchase with cash. Cash is always the best way to purchase discounted properties. Cash speeds the buying process because it eliminates the hassles of mortgage underwriting. In some cases, as with the foreclosure auction, cash will be the only purchase option. Using cash is actually a way to find properties in and of itself: Once you are known as a cash buyer, cheap properties will find you.
- Always evaluate your property prior to purchase.
- Know the market value of the property. Ask your real estate agent to help you with this.
- Get an estimate of needed repairs if possible. If this is not possible assume the worst and prepare.
- Check the Title. Cheap properties are often distressed properties that often have multiple liens. A few hundred dollars spent with the title company is a good way to avoid this.
- Competition is high at auctions. Focus on several properties for purchase and not just one.
- Before going to a foreclosure auction, seek the advice of someone who has already done this. You can't always view an auction property prior to purchase.