Houses: Should You Invest in Foreclosure Properties?

Houses are one of the most popular types of real estate investments. Even when the real estate market is in a slump, housing prices eventually turn upward and create a profit for the homeowner or investor.

In today's market, millions of houses have fallen into foreclosure. A vast majority are priced under market value. In fact, experts report housing prices have decreased nearly ten percent nationwide. Many U.S. cities have reported housing prices have plummeted by nearly twenty percent. Add in the vast number of foreclosure houses and it is easy to see a very bleak real estate market.

In reality, the abundance of foreclosure houses combined with low-interest mortgage loans and decreased market value has created a buyer's market. Many investors and first-time home buyers are seizing the opportunity to invest in distressed properties such as foreclosure and real estate owned (REO) houses.

Purchasing foreclosure houses can be a rewarding and profitable experience. However, distressed properties usually come with their fair share of headaches and challenges. The majority of foreclosure and REO houses require considerable repairs or renovations. Some have sat vacant for several years and been subjected to neglect or vandalism. Unless you plan on keeping the property for a minimum of five to ten years, or are a professional house-flipper, investing in foreclosure houses might not be the best strategy at this time.

Prior to investing in foreclosure houses, real estate experts advise buyers to conduct market research. Comparable pricing of houses sold in the area within the past six months can be obtained via the Internet or through a Realtor. The goal of investing in foreclosure houses is to purchase them significantly below market value. If this cannot be accomplished, it's probably best to pass on the deal. Once you locate property of interest it is recommended to obtain a professional inspection and appraisal.