The COVID-19 pandemic brought numerous challenges and disruptions to various sectors of the economy, including the real estate market. As the world gradually emerges from the grips of the pandemic, one significant development is the reopening of foreclosure courts. This development brings with it a potential windfall for real estate investors, as it signals an increase in the inventory of distressed properties available for purchase. In this blog, we will explore the benefits that real estate investors can reap from the reopening of foreclosure courts and the subsequent rise in real estate inventory.

Expanded Opportunities for Investment

Foreclosure courts play a vital role in the real estate market by facilitating the legal process through which properties are reclaimed by lenders due to the borrower’s inability to make mortgage payments. The closure of these courts during the pandemic restricted the availability of distressed properties for investors. However, the reopening of foreclosure courts now unlocks a new wave of investment opportunities.

With foreclosure courts resuming their activities, real estate investors can expect to find a larger pool of distressed properties to choose from. This expanded inventory allows investors to cherry-pick properties that meet their investment criteria, whether they seek fix-and-flip opportunities or long-term rental investments.

Potential for Lower Acquisition Costs

The increase in foreclosure inventory often translates into more competitive pricing. Distressed properties are typically priced below market value, as lenders are motivated to sell quickly and recoup their investments. Real estate investors can capitalize on this situation by acquiring properties at more favorable prices, thereby maximizing their profit potential.

Moreover, the reopening of foreclosure courts may lead to an increase in motivated sellers eager to avoid the lengthy and costly legal proceedings. These sellers may be more willing to negotiate and accept lower offers, further benefiting savvy investors who can identify lucrative deals.
Diverse Range of Properties

As the foreclosure inventory expands, real estate investors gain access to a wider range of properties in various locations. This diversity enables investors to diversify their portfolios and tap into new markets. Whether an investor is interested in residential, commercial, or multi-family properties, the reopening of foreclosure courts provides a broader selection to choose from.

Potential for Appreciation and Profit

Historically, real estate has proven to be a solid long-term investment, and the reopening of foreclosure courts may present an excellent opportunity to capitalize on potential future appreciation. While purchasing distressed properties requires an investor to invest time, effort, and capital into renovations or repairs, the outcome can be a substantial increase in property value.

By identifying undervalued properties, real estate investors can strategically enhance and improve them, thereby increasing their market value. This can lead to significant profits when the property is sold or rented out once the market rebounds.

Addressing the Housing Shortage

The increased inventory resulting from foreclosure court reopening may help alleviate the housing shortage in certain areas. As the pandemic placed financial strain on many homeowners, some may have faced foreclosure due to their inability to meet mortgage obligations. By purchasing these distressed properties, real estate investors not only secure investment opportunities but also contribute to the revitalization of neighborhoods and provide housing solutions for those in need.

Here are five types of foreclosure and the approaches to buying:

1. Pre-foreclosures

A property is in pre-foreclosure after the mortgage lender has notified the borrowers that they are in default but before the property is offered for sale at auction. If a homeowner can sell the property during this time, they may be able to avoid an actual foreclosure proceeding and its negative effect on their credit history and future prospects.

Pre-foreclosures are typically listed in county and city courthouse buildings. In addition, many online resources, including Foreclosure.com, list properties that are in the pre-foreclosure phase.

2. Short Sales

In a short sale, a lender is willing to accept less for a property than the amount that is owed on its mortgage. Borrowers do not necessarily need to be in default for a lender to agree to a short sale. However, they typically need to prove some type of financial hardship that is likely to result in default, such as the loss of a job.

In these cases, the home is likely to be underwater, meaning that it is worth less than the outstanding mortgage balance. To qualify as a short sale, the lender must agree to “sell the property short” by accepting less than is owed, and the home must be listed for sale.
These properties are usually advertised as short sales “pending bank approval.”

Purchasing a short-sale property is in most regards the same as a traditional purchase, but the language in the contracts will differ, specifying that the terms are subject to the lender’s approval. A bank may take several months to respond to a short-sale offer, so the process can take considerably longer than a traditional purchase.

Many real estate websites, including individual firms and listing services, offer the option to search by short-sale status.

3. Sheriff’s Sale Auctions

A sheriff’s sale auction occurs after the lender has notified the borrower of default and allowed a grace period for the borrower to catch up on mortgage payments. An auction is designed to help the lender get repaid quickly for a loan that is in default.

These auctions often occur on a city’s courthouse steps and are managed by local law enforcement authorities. The property is auctioned to the highest bidder at a publicly announced place, date, and time.

Notices can be found in local newspapers and on the web. Search for “sheriff sale auctions.”

4. Bank-Owned Properties

Properties that do not sell at auction revert back to the bank. That is, they become real estate-owned (REO) properties.
These properties are often managed by the institution’s REO department. Online sources such as RealtyTrac have extensive listings of bank-owned properties that can be searched by city, state, or ZIP code.

5. Government-Owned Properties

Some homes are purchased with loans guaranteed by the U.S. government’s Federal Housing Administration (FHA) or Department of Veterans Affairs (VA). When these properties go into foreclosure, they are repossessed by the government and sold by brokers working on behalf of the federal agency.

A government-registered broker must be contacted to purchase a government-owned property. Buyers can find a registered broker on the website of the U.S. Department of Housing and Urban Development (HUD)

Conclusion

The reopening of foreclosure courts after the COVID-19 pandemic presents an exciting opportunity for real estate investors. With an expanded inventory of distressed properties, investors can seize potential deals at favorable prices, diversify their portfolios, and contribute to addressing the housing shortage. As always, thorough research, due diligence, and a strategic approach are crucial when venturing into the foreclosure market. By leveraging these newfound opportunities, investors can position themselves for long-term success in the ever-evolving real estate landscape.

Here I think we can end with the foreclosure.com section that has the documents and specifically with the “buying a foreclosure checklist” (if that can be done through our specific link) or say something like…

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Go to https://www.foreclosure.com/?rsp=3647 to find the latest list of pre foreclosure, foreclosure and bankruptcy properties!