A Short Guide to Foreclosed Homes

Foreclosed properties make profitable investments both in the long term and short term. This type of home is more cost-effective to buy when you compare it to conventional investments and can be incredibly lucrative for savvy real estate investors. Here is a guide to investing in foreclosed homes and what to look out for.

Who Should Invest

Experienced investors with good business acumen and willingness to perform in-depth research into the property can expect profitability from foreclosed properties. Foreclosures

are bought as-is, and so a lot of time and money may need to go into renovations before you get a return. They are a risky choice for inexperienced real estate investors. Investors who are willing to take the risk should conduct research into both the foreclosed home and the local market as well.

Advantages of Purchasing a Foreclosed Home

Foreclosed property investors can benefit from reduced down payments, fewer fees overall, and low-interest rates. In addition, foreclosed properties come with a market value discount. Therefore, if you choose the right property, you can benefit from paying a lot less in the long run.

What to Look Out For

Foreclosed homes can be sold in a terrible state of disrepair. Depending on how serious the damage is, you may need to fork out for costly renovations and repairs. In addition, foreclosed properties come with a lot of paperwork, and sifting through the documents can be a tedious, time-consuming process.

Invest With Private Money Lenders

Foreclosed properties can go off-market quickly and so you need to be ready to invest fast. However, investing in foreclosed homes is a risky business for many traditional lenders, so you may need to seek different means. Private money lenders, such as Sachem Lending, provide borrowers with loans to suit unique needs. In addition, they can close in a short amount of time to allow you to access funds quickly.

Different Stages of Foreclosure

Being able to identify the different stages of foreclosure can help you gauge the risk of damage. In general, a foreclosed property that is on the market in the early stages is usually in better shape than homes in the later stages.

Short Sales

A short sale is the first stage of foreclosure, and these types of properties can be found on real estate websites. At this stage, the property is usually still inhabited by owners, meaning that the home should be in a good state. A short sale is a voluntary process that borrowers may choose due to financial difficulties. This option requires them to sell at a reduced rate and enables them to purchase another home.


Potential buyers have a higher chance of negotiating a good price for pre-foreclosures as this type of property is just about to go into auction. These properties are usually still inhabited, and homeowners will want to make a quick sale to maintain a good credit rating.

Sheriff’s Sale

Sheriff’s sales occur at the end of the foreclosure process, and they enable lenders, banks, and tax collectors to regain money lost on the property.

Bank-Owned and Government-Owned Properties

Bank-owned properties revert back to the bank if they are not sold at auction, while government-owned properties are repossessed and sold by federal agency brokers once they go into foreclosure.

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