Foreclosures surround almost any real estate market around the world.
And being successful in any foreclosure procedure may not be the truth for all investors, whether individual or corporate.
One way to guide a profitable foreclosure buying or selling is to have knowledge about the real deal inside this real estate endeavor.
Fiction 1: Lenders do not profit much from foreclosures.
The main objective of a foreclosing lender is gaining ownership of a property from a delinquent payer.
In the process of ownership, there are attached financial recovery - principle loan balance, accrued interest, late fees, professional fees for lawyers and court proceedings, among other expenses.
With all these expenses, it is almost logical to assume that the lenders would not make even small profits.
However, once the property is repossessed, the bank or any lending agency with the repossessed property could do anything with it.
It could be rented, kept or even sold for any amount.
Hence, the profit is not necessarily sacrificed, nor sold at the price to match only the repossession expenses.
Fiction 2: Liens or judgments are always attached to foreclosed properties.
Most buyers would be naturally cautious about the soundness of the investment, and being worried if the condition of the property title would become the prospective property buyer's liability.
This is hardly true especially when it comes to properties that lending agencies put up in auctions.
Even before the foreclosed property is put on the auction process, the lending agency would wipe out all junior liens or judgments.
The lender would also pay for the outstanding balance on property taxes for clean title possession.
And when the property is done with all these liabilities, the lending agency may or may not add the expenses to the asking price of the property.
However, you must note that when foreclosed properties are not auctioned, it is a sign that these properties have superior liens like IRS or tax issues.
And if the lender wants to sell the property including all the expenses for taking out liens or judgments, you better look for another foreclosed property to buy.
Fiction 3: Lenders bend over backwards just to "give away" foreclosed homes.
Most foreclosed properties are less expensive than properties in the mainstream real estate market.
It is also a reality that lending agencies want to quickly sell foreclosures.
Nonetheless, banks and other major lending agencies are corporations mainly driven to earn profits, not in any way to accrue more financial losses.
These lenders think thoroughly enough to devise methods and processes which would provide them more earnings.
Conversely, there are banks and lending agencies out there that may have real concern for buyers.
To be sure you are getting such treatment, you may first want to research about the company's vision, mission and objectives.
If you see a connection, then jump right in buying their foreclosed properties.
Fiction 4: Banks offer the best foreclosed properties.
Although most foreclosed properties could be purchased from banks, they are not necessarily the best choice among foreclosing lenders.
Since the banks are huge lending companies, it is safe to presuppose that their properties entail much legal work.
Banks have top-down hierarchies that require and endorse elaborate processes in transactions, especially in terms of repossessing and assessing losses.
These have loss mitigation departments that are an added factor in lengthier purchase process.
However, the processes gone through the bank may be an actual advantage for you as you could be ensured that the legal work secures an almost flawless transfer of ownership.
Fiction 5: Lenders advertise and handle their foreclosed properties equally and in the same manner.
There is a dichotomy for this fiction.
One is that since lenders are varied in many ways, the methods of promoting foreclosed properties also greatly vary.
The only thing common among lending agencies is that the foreclosed properties are acquired legally.
Advertisement is another matter.
Lenders post availability of foreclosed properties in several ways: daily newspapers, MLS, online sites and directly from their offices.
Managing the foreclosure process and purchase is also different.
Some hire or establish special departments or remote agencies in handling mainly the foreclosed properties.
Another is that foreclosed properties are as different as their previous owners; hence the repossession processes are also different.
Priorities are then different.
The properties with nearest expiration of over due taxes and liens are surely the first to be paid for.
And to immediately recover from the expenses, these kinds of properties are the ones prioritized in auctions.