How to Weed Your Foreclosure Leads

There are many factors to consider when looking for foreclosure opportunities. The first factor is how to identify a prospect. Countless properties in foreclosure aren't worth the time and should be avoided; only a select few are actually attractive investment opportunities. Let's take a look at how to identify those that might be worth more time.

To begin, you'll need a list of properties going into foreclosure. Your real estate agent, title representative or local government administrator can help you find one of these lists. Next you'll need to scrutinize each property to determine if it has what it takes to be a worthwhile opportunity. The following steps can be used as a guide to weed through your list of potential investment opportunities.


Step one:

Step one is to determine a target area. You'll have a better chance of spotting a good opportunity if you're familiar with the area but this isn't a requirement. The properties can be broken down by zip code, city or county or any other criteria that are significant to you and your market area.


Step two:

Step two is to weed out commercial properties. Commercial properties go into foreclosure just like residential ones, but this involves a more complicated process so I would suggest sticking with residential prospects. Residential property is anything from 1 to 4 units. Review your list and avoid anything that has more than 4 units.


Step three:

The third step is to determine a target resale price range. Sticking to the median home price is a good rule of thumb as a beginner. The trick with low priced properties is that the repairs and improvements can cost too much and eat away any profit. Because of the carrying costs, high priced investments can also become a liability if they can't be sold quickly. Once you become comfortable with the process, your price range can be expanded.


Step four:

The last step is to determine the available equity. This is done by comparing the market value with the amount of the loan in foreclosure. If the amount of the loan is less than 70% of the market value, the property has potential. There may be other debts that need to be identified, but 30% equity is a good start!

Now that you have a list of potential properties you'll need to dig in and investigate the public records more extensively for each of them. There are many ways to purchase a home in the foreclosure process and each has different aspects to be aware of. Work with a real estate agent or title person to go over the details and legal aspects before moving forward on any foreclosure opportunity.

Contact us today to learn more about how to begin investing in foreclosures!

*Please bear in mind that the information supplied in our articles is not engaged in rendering legal, financial, or any other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Have any questions about Denver Real Estate? Contact Denver Realty Experts via email, phone 720.263.0373.

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