Dangers of Investing in Foreclosures

Consumers should be weary of paid programming that encourages them to make huge profits in foreclosure investments. Sure, there have been success stories of people who “paid no money down” and made “huge profits” by “investing in foreclosures,” but their are dangers lurking under the murky water of investing in foreclosures for profit. Just because home prices are lowered and mortgage rates are at historical bottoms, you must consider the dangers of investing in foreclosures before taking the first steps.

The game of investing in foreclosures was easier years ago when fewer people were willing to take the risks associated with the process. But with the surge of foreclosed properties, people are itching to find a way to convert the financial storm clouds to those with sterling silver linings. If you are getting the itch to invest in foreclosure, please consider the following dangers:

  • Ending up with “money pits” that require a never-ending stream of cash to repair
  • Having to evict tenants who do not plan on  leaving without a long, tiresome battle
  • Non-savvy consumers new to the foreclosure process may unwittingly purchase homes that are saddled with substantial tax burdens that they will become responsible for
  • State laws that can draw out the foreclosure process from a month to more than a year
  • Over saturated market with more properties than prospective home-buyers may leave you saddled with a foreclosed property for longer than anticipated
  • Home-buyers are finding it increasingly difficult to secure home loans, thus increasing the time you will need to be saddled with your foreclosure investment property
  • There are several ways to buy foreclosed homes, but purchasing foreclosures at auction are the riskiest as you will be buying a property sight unseen and without an inspection
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As long as you properly educate yourself on the dangers involved in foreclosure investment, you may be able to make the business work for you. Do not, however, enter the game blindfolded as you may be very upset by the ultimate outcome.

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GOBankingRates Staff

These articles are written by the in-house GOBankingRates team.

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Dangers of Investing in Foreclosures
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