Common Foreclosure Stumbling Blocks to Avoid

Foreclosure Bus TourWe’ve talked before about the value of buying foreclosures and how they can save you a considerable amount of money and help you find solid, affordable real estate investments quickly. There are some things to keep in mind, however, before investing in any type of property, particularly foreclosures.

While the opportunity to purchase a valuable piece of property or a terrific building at a fraction of its market value sounds like a coup, be aware that there can be problems associated with buying foreclosures, one of the most horrifying being possible legal issues. Ensure that the bank or mortgage lender who has placed your dream property on the market has followed the proper procedures in advance.

Specific time periods and notices are required, and ample opportunity for the owner to bring the loan up-to-date are required, in addition to other regulations that may apply for individual locations. Jumping the gun and selling a property before the proper steps are taken can result in legal headaches for the new buyer (You!) down the road. And those aren’t worth any “great price” you may find in a foreclosure.

In addition to the potential legal issues, foreclosure properties that have sat vacant for awhile may have developed physical damage from rain, wind, hail or other natural effects. Be sure to have the property inspected closely unless you’re prepared to pay additional money out-of-pocket to repair damages, or take a loss while a rental property sits empty during renovation.

Another potential stumbling block when buying a foreclosure is getting in over your head. Not just in terms of property values and potential debt, but in the fact that buying a foreclosure may be more than you’re ready for, particularly as an REI beginner.

Learning all you can about the foreclosure process and taking your time to understand exactly what takes place before you commit your time and money is key to REI success. Purchasing a foreclosure involves more than simply getting a loan and making payments. Be sure you can handle the process and avoid biting off more than you can handle!

One last word of warning for would-be foreclosure investors is to never underestimate the process. Every foreclosure is different. And each one comes with its own unique set of curves. Your state’s laws regarding foreclosures can vary, the type of foreclosure you’re purchasing (government, auction, bank foreclosures, FSBO, etc.) and more can all affect the process. Be sure you know all you can about every aspect of the foreclosure game in advance. Forewarned is definitely forearmed in the REI field.

Tags: , , ,

About reibrain

Hey, my name is Trevor and I'm the founder of The REI Brain and editor/contributor. I started investing in real es.tate when I was 21... and love entrepreneurship, the internet, and real estate. My main focus today is growing my companies, systemizing my businesses so I can work less and make more, and spend more time with my family. Learn more about me at


  1. Defaulting on Mortgages: A Business Strategy | Real Estate Investing For Real Life - Real Estate Tips, Life Success - The REI Brain - May 9, 2012

    […] on their house but decide they will lose less money by defaulting on the loan and heading into foreclosure, especially if they owe more to the bank than the property is worth. So they take their time to […]

Leave a Reply