Foreclosures normally take place due to non-payment of loans and taxes by a homeowner. This provides investors and homebuyers with a good opportunity to purchase such a home at a lower price. The FDIC, SBA, HUD and VA sell foreclosed properties. These foreclosed properties are also available through the government sales program. The REO(Real Estate Owned) also known as Bank owned properties, and Pre foreclosures, are the other types of foreclosure properties. There are around a million foreclosed properties to be sold in the market today.



A foreclosed property is a good way to make money in the real estate business. It is the most common and most profitable way to make a fortune. Bidding for a foreclosed property is no childs play. One needs to be carry out research of the market place, value of the property and bid accordingly. A good research can make a lot of profit out of the foreclosed property. Another benefit of winning a bid of a foreclosed property is that the transfer of ownership takes place immediately after the bid.

One can make a lot of profit by bidding the right amount for a foreclosed property. There will be a vast difference in the discounted price at the bid and the price of the property one can sell it for. A bid for a foreclosed property need not be always competitive. The interested bidders are given up to 14 day to assess the property and figure out the cost of the property including issues such as fix up cost and lien cost. The cost of repairs that mostly includes the lawns and the paint is very minor compared to the profit one makes from the foreclosed property. These expenses are uncertain but they are negligible to the amount of money an investor saves on the property.

To understand how a foreclosure property earns a lot of profit let us consider a small example. A property whose market value is of $90,000 is for sale and you win the bid at $40,000. Let us consider the repair expenses of the house to be $10,000. You decide to sell the house for $80,000. A family is overwhelmed to purchase a house for $10,000 less than the market price. Here, you as an investor, make a profit of $40,000, while on a normal property you would have made a profit of only $10,000 to $15,000.

Well, one can also make a lot of profit by buying a foreclosed property from the owners of the house directly. This is known as Pre-foreclosures. The reason foreclosure properties are so cheap is because a borrower of a loan or tax was in default and is ready to sell the property at an extremely low price compared to the price of the other similar properties. This kind of transaction is cheaper for the buyer because the property owners are keen to sell their home to avoid their credit rating to drop. The easiest foreclosure property to purchase would be the REO (Real Estate Owned) or Bank Owned Property.