The Basics of Real Estate Foreclosure

In order to invest profitably in the pre-foreclosure market, it's necessary to understand all aspects of the foreclosure process and how to operate in each of the stages within that process. It's also necessary to understand what options are available to homeowners so you can see the process through their eyes and help them to make the best decision possible as well as the best one for yourself.

Let's start by looking at the three stages of foreclosure-pre-foreclosure, foreclosure and real estate owned (REO or OREO). As an investor, you can operate in any three of these stages, but, as you'll see, the pre-foreclosure stage offers the greatest profit opportunities and the least amount of hassles.

The Pre-Foreclosure Stage

A pre-foreclosure sale takes place between the time when the lender files suit and when the property is scheduled to be sold at a public foreclosure action or a trustee's sale. Here's an overview of the benefits of buying pre-foreclosure properties so you can contrast them with the disadvantages of the foreclosure and REO stages.

Benefits of Pre-Foreclosure

* Deep discounts * Ability to research inspect property/more accurate value estimates * Ability to avoid the potentially expensive bidding process * Ability to structure sales agreements in a creative fashion * Less hassle from third parties (lenders, etc.) * The potential for minimum cash outlay