Three Types of Foreclosed Land Purchases

Purchasing foreclosed land can be a profitable venture for developers, investors, or those looking for the perfect lot to build a home.  Purchasing foreclosed land for sale is commonly done through the following three sales methods; short sale, auction and REO. 

Short Sale:  When the value of land has sunk below the balance of the mortgage or mortgages on it, owners will often try to get the bank to agree to a short sale.  Under this arrangement, if you make a fair-market offer on land that is less than the amount owed, a bank can agree to accept this offer and forgive the remaining debt on the property, staving off a foreclosure for the owner.  It can be a good deal if it works, but getting the bank to agree can be a lengthy and aggravating process for the seller and the buyer.

Auction:  Another way of purchasing foreclosed land is to buy it at auction on the courthouse steps.  Plenty of investors do this, often because it’s a way to buy an cheap land for sale with multiple liens, but for most people this option carries many risks.  For one thing, you have to be ready with a check that day for the full amount you plan to bid.  Also, you don’t get to conduct your own inspection and are usually buying the land sight unseen.  Moreover, you must do your own title search or else liens on the property could prevent you from getting a clear title when you are trying to sell.

REO:  These are the properties that went to auction but were not bid on, and so they reverted to the lender holding the mortgage. In a hot market, these properties will sell for full market value.  But these days, with sales sluggish and banks holding large inventories of this cheap land to buy, many lenders are motivated to discount the price to move the properties off their books.  Just how much depends on the market, the financial condition of the bank and how many other foreclosure properties are in the area.

The key pieces of advice for successful foreclosure buying are to be educated, be thorough and be unemotional about the houses you bid on.  To learn more about any of the above sales processes or to purchase foreclosed land contact an expert member of the team at (239) 333-2221.

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