Foreclosures are properties on which borrowers have failed to make the required loan repayments for extended periods of time, resulting in the lender forcing the sale of that property to recover the balance of the loan. The overall foreclosure process can unfold a number of ways depending on the lender, the state the property is located in, outside involvement in the process, and many other factors. However, typically a traditional foreclosure will result in the property being publicly auctioned by the county with the proceeds going to the lender to cover the balance owed on the loan and any proceeds beyond the loan balance being returned to the borrower.
Foreclosures were rife in America over the several years after the global financial crisis hit the US housing market. In 2010 foreclosures peaked at 2.9 million, in 2011 there were 1.9 million, in 2012 there were 1.8 million foreclosures, and since then they’ve continued to drop but have far from disappeared. While all of these foreclosures represent great heartache and pain for many investors and home owners alike, it is a sad but true reality that they represent a massive opportunity for present day real estate investors. These properties have been sold for pennies on the dollar relative to not only their pre-GFC highs, but also to their current market price.
The last few years have seen the competition for foreclosure investment opportunities increase and the purchase prices for these investments correspondingly rise. The pool of investors competing for these foreclosures has increased over the past few years as the housing market improved and investors recapitalised their balance sheets. All of this profit and activity has prompted the “big money” to take notice and begin to move in – hedge funds and institutional buyers now dominate auctions all over the country and have been pricing out the smaller investors. That being said there are still many opportunities to buy foreclosure properties for those investors willing to dedicate the time and effort.
Many of the investment property providers we recommend to our clients are involved in the purchase and renovation of foreclosure properties which are then sold as turnkey properties. This is an easier avenue for foreign investors to pick up great deals than participating in the foreclosure game themselves. However, we’re happy to point brave souls in the right direction if they reach out to us.