Land foreclosures allow savvy investors to purchase a piece of land in order to build a dream house, lucrative commercial property and more. If you have cash on hand, land foreclosures allow you to get a bargain price on prime property.
Land foreclosures are pieces of property that were financed and the owners have defaulted on payment of the loan. As a result, it has been repossessed by the lender. The lender, however, does not want the property. They want the money for the property. As a result, they are looking for a new buyer and are often willing to part with it for below appraisal price.
The longer a lender has land foreclosures on their books, the more eager they are to dump them. Whoever owns the land must pay the property taxes. Because this land is not generating any income for the lender, it represents a net drain. That is why lenders are so eager to get rid of land foreclosures.
You can buy land foreclosures at three stages. The first stage is the pre-foreclosure. In pre-foreclosure, the original owner still owns the property but is behind on the payments. If they can arrange a sale with an investor, they may be able to save their credit. The lender is motivated to work on the terms of the sale with the investor because they do not want to take on responsibility for the property if the owner walks away.
In many ways, you are doing everyone a favor when you buy a piece of property in pre-foreclosure. The landowner gets to walk away with their debts clear. The lender or bank does not have to assume the property. And, you get a deal.
If no pre-foreclosure sale is made and the owner defaults, the lender must pursue a foreclosure which ends when the property is sold at auction. Land foreclosures can often be picked up for a song on the courthouse steps.
But, often there are no buyers at auction and the bank buys the property themselves. At this point, they will publish a list of land foreclosures that they are willing to sell at a discount just to get them off the books. Typically, investors pick up land on the bank’s books for 20 percent or more of the appraisal price.
If you are planning to invest in land foreclosures, it is important to become familiar with the process of buying. This is a unique form of real estate investment and there are many traps for the novice buyer. You should know that up to 85 percent of short sales never go through largely because the investor either doesn’t know the process well enough to carry it out or because their own financing falls through.
Land foreclosures can be a good way to build your wealth. You may be able to get your dream property for a song. But, if you are unprepared to finish the deal, be prepared for a lot of heartaches when it comes to land foreclosures.