For investors, buying foreclosure properties is always a risk. In a post on Forbes, Chris McAllister, Founder of Real Estate Brands Ltd., discussed the different methods by which investors can secure foreclosure properties, noting what to look for and the pros and cons for each method.
“There are a lot of misconceptions out there about what it takes to get a great investment property at the best possible price,” McAllister said. “In my experience, foreclosed properties have always offered the most house for the money. These purchases, however, are more complicated than buying a house from a private seller, and often not for the faint of heart.”
Foreclosure auction, or sheriff sales, are considered “hit or miss,” according to McAllister. He notes that at these auctions, the foreclosing banks will often bid the price up to buy it itself, and eventually place on the market as an REO property. Additionally, McAllister notes that sheriff sales often mean buyers do not get to see the property before purchase.
McAllister also points out that short sales have been waning in popularity in recent years, and rarely result in better deals. The best method, McAllister says, is the multiple listing service (MLS). Through MLS, investors can find postings from all the major government players including the Department of Housing and Urban Development (HUD), Fannie Mae and Freddie Mac, as well as properties from investment firms looking to sell properties they purchased as part of pool sales will list with local real estate firms.
What “makes or breaks” the REO purchase process will be your REO agent, McAllister argues, and the best agents have a strong understanding and inside knowledge of what is on the market at all times.
Outside of the traditional methods, new technology coming to the foreclosure market is making investing simpler. According to a recent Gallup poll, 35% of Americans believe real estate to be the superior long-term financial investment, compared to 27% who say stocks are the better investment. For real estate investors, tech such apps which allow for remote bidding could provide a quicker way to take advantage of the rising positive sentiment toward real estate as an investment. Additionally, many current homeowners (around 1 in 10) say they would prefer going back to renting over owning, according to Gallup's research, which could be a boon for single-family rental investment.