What You Should Know About Foreclosure Vs. Regular Investing

by : Robert Lam

I'm a big fan of investing in foreclosure properties. But I've bought and sold regular properties too. Both can be great investments. However, due to some key differences between these two kinds of property investment, one may suit you more. Let's take a look at some of these differences which you ought to know...

1. State of property

Many foreclosed homes have been left in a less than ideal condition and need substantial repairs and renovations. More so than with most regular properties, foreclosures are often best monetized as "fixer uppers". Having said that, just because a home owner has defaulted on their mortgage doesn't meant their property is in disrepair. Nor does it follow that someone who is voluntarily selling their home has looked after their property. It's ultimately up to you which kind of property to invest in, and whether or not you want to invest in a fixer-upper.

2. Need To Sell vs Want To Sell

Owners of homes that are subject to foreclosure proceedings need to sell their property. If they have just received a notice of default from their lender they will have a certain time frame in which to sell the property before it goes into formal foreclosure. This gives you, as a property investor, bargaining power.

Unfortunately, such home owners also tend to be emotional, reluctant sellers who can be difficult to deal with. They may not even do what's in their own best interests! Vendors of regular properties, on the other hand, want to sell their homes. That often makes them easier to deal with, as the only issue will really be the terms of the sale... not whether or not to sell.

2. Discount vs Hassle

The whole attraction of foreclosures lies in the ability to get them for a significant discount on their market value. You can sometimes get up to 50% off the value of a home. On the flip side, foreclosure properties often come with a lot of hassles too. They need work... they may come with liens and unpaid taxes... and there are certain legal procedures to deal with in order to buy them.

There are also other differences between foreclosure investments and other kinds of properties. However, these are definitely major considerations when deciding which kind of property investment to specialize in. Stay educated with both kinds of investing because there is a wealth of opportunity in both. A lot more information is found in .

Keep in mind, though, that there's no reason why you can't tackle and conquer both foreclosure and non-foreclosure investing. In particular, the market moves in cycles. At certain times there will be better opportunities in foreclosures than regular properties, and at other times the reverse will be true. So by investing in both, you will give yourself more investment opportunities.