Building wealth quickly

Many investors wait for everything to be in line before they move on to the next step in the process. As an example, an investor may have a ratified contract on a foreclosure that needs repairs and wait until the house has settled and then start doing the repairs. As soon as the repairs are all complete, they then move on to the marketing stage of the investment that they have made in order to sell it.

This is completely unnecessary and increases carrying cost which has to be factored into the profit from the purchase and sale of the foreclosure. Carrying costs are the same as lost profits in the best case scenario. It is fair to say that it is factored in as lost income if the investor had been more proactive. It is even fair to say that the expense of paying the mortgage during the carrying phase is an expense rather than lost profits. The wise investor waits only for the ratified contract and then begins to market the property in the hopes of finding a buyer that is ready willing and able to purchase even if the house needs some repair.

By advertising early we are able to give the end buyer the chance to select their own colors for carpet and paint if the home requires it. Either way the carrying costs can be dramatically reduced if we market the property prior to taking possession. This way we can move on to the next deal more quickly as well and increase our volume over the course of time.

HUD Foreclosures

HUD foreclosures and VA Foreclosures are some of the best homes to buy when price is part of the equation. As with most Americans, price is always a concern. If not buying the same house for less, why not buy more house for the same dollar invested? When looking for a good deal it is hard to do better than the VA or HUD foreclosures market. The simple truth is that there are just more VA and HUD homes on the market, as they represent such a large number of mortgages that are generated each year. This translates into more foreclosures just by the magnitude of difference between all others comparing to the two largest.

The two largest also being government owned and operated means that they have less time to wait to make money back on the home. The FHA is especially known for selling HUD homes for less than the average sales price in a given area. FHA foreclosures represent a fraction of HUD but they are still a significant number of homes and both should be considered.

VA (Veterans Administration) and HUD (Housing and Urban Development) have different and unique opportunities for the buyer. Both are often forgiven for the local taxes normally associated with the purchase of a home (this is on a county by county basis). Be sure to ask the local title company or escrow company to look into it for you before closing as this is often missed due to their are not used to dealing with the 2 to 3 percent of the market that VA and HUD foreclosures represent.

Foreclosure Listings Increasing

As the market settled after the mortgage meltdown foreclosure listings also settled and fewer homes were on the market with a placard reading “Bank Foreclosure” in big red lettering. This was a good thing for the entire real estate market. Having an abundance of foreclosures brings the entire market down and it makes it harder for home owners, who would like to move, to get the appropriate price for their home as a similar home down the same street was sold for substantially less and the appraiser is using the foreclosure as a comparable sale.

This is just one of the problems when there are too many foreclosure listings in any area. Another issue is the television set that sits in everyone’s living room harping about the price of homes based on the number of foreclosures and this constant barrage of negative information makes most people sit on the sidelines waiting for the market to either implode completely or to correct itself. Meanwhile while they wait, others are buying foreclosure listings and making great investments.

Whatever the reason, a market can only handle so many foreclosure listings at any given time. The more foreclosures, the lower the market gets and this is a lesson the banks that were foreclosing and selling off realized too late. The market and their investments would have been better off if there had not been a rush to divest themselves of the toxic assets made more toxic by their own actions.