What is a Real Estate Foreclosure?

Real estate foreclosures are properties that have been acquired by mortgage lenders because the owners have defaulted on the loan payments. When the mortgage payments become delinquent, the lender takes the property that was pledged as collateral for the loan. Lenders must follow the state laws where the property is located. An owner may default for a number of reasons including death, illness, divorce, or loss of employment. When the property is in default, the owners and lenders try to work out some kind of resolution in a process called �loss mitigation�. At this time the property is under a status referred to as �preforeclosure�. If a resolution is not agreed upon by the owners and lenders after three months of delinquent payments, then the property will go under foreclosure.

Someone else may offer to solve the problem by buying the property from the owner during preforeclosure, from the lender at time of the public foreclosure sale, or afterwards. Foreclosures present an opportunity for savvy investors and prospective home owners looking for a great bargain. Buying properties in foreclosure prove to be a profitable investment because they can be purchased at a price that is 10-50% below market value. The mortgage lender or government agency that has seized the real estate is motivated to sell the property as quickly as possible, resulting in a discounted price. As a new owner of the property, your purchase of a foreclosure as your home will result in instant equity. As an investor, you can buy a foreclosure for resale or rental with rewarding profit margins.