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Foreclosure investment has drawn
more attention lately due to rising
interest rates on adjustable and negative
amortized loans. Also, higher property
taxes, un-rented vacant homes, and
unemployment have contributed to this
activity. Foreclosures and pre-foreclosures
are a great way for real estate investing
professionals to obtain properties
at depresses prices.
When outstanding loans or obligations
against a property are greater than
what the property can be sold for,
a short sale may come into play. For
owners who can no longer afford to
keep mortgage payments current, this
may be an alternative to foreclosure.
The respective lender must agree on
the short sale and by doing so, is
agreeing on accepting less that the
total amount due on the property.
A lender will not approve a short
sale if it would make financial sense
to foreclose. Similar to foreclosures,
short sales provide investors with
great opportunity to get a good deal
on a property.
For investors looking to purchase
a home in a particular real
estate market, researching for
areas where supply exceeds demand
may lead one to a buyers market. Buyers
will have more homes to choose from
in this type of a market and thus
will increase the chance of finding
a cooperative seller. Sellers in distress
will tend to contribute incentives
such as seller paid closing costs,
repair costs, and/or even "cash
back" at closing.
Real estate investing may also lead
an investor to pursue a 1031 Exchange
(also known as a Like Kind Exchange).
This is a way of structuring a sale
so that the seller's profit is not
currently taxed. Instead, a property
is replaced with a like kind property
and thus the respective gain is deferred
to a future date. Since the taxpayer
is merely exchanging like kind properties,
there is nothing received by the taxpayer
that can be used to pay any respective
taxes.
Investing in real estate can be a
rewarding experience if properly researched
by an investor. However, risks to
be wary of include buyer demand factors,
interest rate increases, and re-acrruing
maintenance factors.
Additional Key Terms
Appraiser
Process Explained - Certified
and Licensed Appraiser - Learn
how the appraiser process is performed.
A licensed real estate appraiser uses
his or her knowledge of the real estate
market to derive at property value.
Real
Estate Appraiser Jobs - Trainee
and Experienced Appraisers - How
do you become a property appraiser?
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