For real estate investors, foreclosed houses are often the perfect type of home sale to get into the real estate business. The foreclosure rate is increasing once more in the U.S. after record lows were seen in June, per data from housing market research company RealtyTrac.
Navigating a purchase involving a foreclosure or any number of bank owned properties is slightly different than a normal resale, and an investor needs to be prepared in order to execute the deal successfully, and hopefully turn a profit in the near future.
Foreclosures rose throughout July
In June, the number of foreclosed houses was the lowest it has been in the last 78 months, according to RealtyTrac. Somewhat predictably, that rate increased in July, up to 130,888 U.S. properties. That marks a 2 percent uptick, albeit still below levels seen in July 2012.
In addition, one out of every 1,001 units reported a foreclosure filing in July, and the most active state was Maryland, with a 275 percent rise in foreclosure starts on a year-over-year basis.
Across the country, the rates are fluctuating. Some states reported a high number of foreclosures and others were still below average, RealtyTrac noted. For real estate investors, finding the best deals on home sales might involve picking the perfect location to buy in.
"U.S. foreclosure activity in July is 64 percent below the peak of more than 367,000 properties with foreclosure filings in March 2010, but is still 54 percent above the historical average of 85,000 properties with foreclosure filings per month before the housing bubble burst in late 2006," said Daren Blomquist, vice president of RealtyTrac. "There are a dozen states, however, where foreclosure activity levels in July were at or below average monthly levels prior to the bubble bursting. Those states include Texas, Colorado, Oklahoma, Indiana and Michigan, and we expect the number of states in this category to increase in the coming months."
Joining Maryland as states with a high percentage of foreclosure starts were Oregon, New Jersey, Rhode Island and New York. Overall, 26 states witnessed a month-over-month increase, while 15 states had yearly rises.
How to buy a bank-possessed property
A real estate investor has several tactics to make a profit in the housing market, and foreclosures are one of them. Courthouse Retrieval System can provide in-depth property data and mortgage records that might be the needed edge for an investor. Buying a home requires a wealth of information, and the best professionals in real estate have that.
For starters, an investor should be pre-approved for any mortgages, according to Bankrate. This way, it will be easier to move forward when the perfect property is spotted.
Pricing isn't written in stone, either. It really depends on comparable homes in the area. While an especially low-priced home might have an investor licking his or her chops, that could lead to a bidding war. Instead, higher-priced houses might be lacking offers, leaving the door open for a lower closing price, Bankrate noted.
Overall, when investing in a property sometimes the best possible offer is the right price to start at, instead of waiting to see what happens. Foreclosures could sell fast, and an investor shouldn't miss an opportunity.