There is a lot to be said about investing in residential foreclosures especially considering the large inventory of distressed properties for sale in the market today. Of course, as a home buyer or investor, you only want to learn about the truth involving these cheap homes.

Because of the owner's failure to continue his mortgage obligations, their homes enter foreclosure. In the first stage, the owner will try to work out a deal with the seller or even sell the property just to prevent the property from being repossessed. But after the reinstatement period has expired, the home will be foreclosed and auctioned off. If there are no winning bids, it will become a property of the bank, turning it into a real estate owned property.

For Home Buyers

If you are looking for a home to buy, you should know that residential foreclosures are the only properties in the market which can offer you two things: instant equity and savings. There is no doubt about the bargain prices since most of these foreclosures are underpriced because of the desire of the seller to remove them from their inventory of home for sale. As for gaining equity, this should not be surprising since they are sold at below their market value.

For Investors

When it comes to the return potential of these repo houses, you should know that nothing else comes close. Imagine, you only need a small capital for the purchase and rehabilitation of these foreclosed homes and you can expect considerable profit. You can choose to flip it or rent it out. In any case, you enjoy a good return of investment.

Like any business venture, investing in residential foreclosures can only be risk-free if you are able to make sure that all bases have been covered. For example, a home inspection before closing the deal is quite important as it uncovers any damage on the property that needs attention. It would also be wise if you check for secondary liens of encumbrances since they could be the source of inconvenience.