The answers are many, but they are not hard and fast.

First, the US government is not going to pull us out of this financial crisis; we are. That’s right, you and me, and the investors, and small business owners are going to be the gears and cogs that pull us out of this recession. The US government can throw billions at this problem, and as we have already seen, it will not provide a speedy exit from this challenging economic climate. If anything, the amount of money injected into the economy will most likely lead to inflation, but that’s a topic for another post.

So how do we do our part?

As anyone who has taken even an elementary course in economics knows, the economy is a complex system with no simple algorithm to obtain a desired result. However, one thing is clear, when everyone stops spending money and there is no “motion” or commerce, the economy grinds to a halt. Just look at the status of the economy post 9-11 for proof of this. Worse, a miserly outlook is a self fulfilling prophesy; in other words, as we see people spending less, we spend less. Companies anticipate sharp drops in revenue and they layoff employees and the dominoes continue to tumble. But there is a light of hope, and a very bright light at that.

Real Estate properties are at their lowest prices in recent years, which gives you an opportunity for a twofold win. 1) You get to buy Real Estate at a great value, and 2) by doing so, you will do your part in helping to return our economy to a healthy condition.

Are we at the bottom?

No one can say for sure, but it’s commonly accepted that we are not. Regardless, most of the hyper-inflated appreciation gained over the last few years has been returned to the ether, and property values are in parity with accepted norms. Even if you buy now and values decrease, it will only be marginal.

Anyone with a pulse on the Real Estate market can feel the surge of anticipation as Buyer’s attitudes are starting to move towards optimism and DOM in some markets are starting to see a decline. Do your own research and you will notice that graphs of key indicators in the Real Estate market are starting to approach inflection points, signs that change is on the way.

Caveat Emptor – Buyer Beware!

Investing in Foreclosures is indeed the best way for you to maximize value and get the most “bang” for your buck. However, there are many potential pitfalls, which amateur investors and homebuyers looking at purchasing a foreclosure should be aware of. As these properties return to banks en masse, the banks are eager to unload these properties so that they can free up capital and invest it (wisely this time, we hope). Therefore, these transactions are more akin to purchases from trench coat wearing back alley dwellers on a vacation to Mexico, because they are offered “as is” with no guarantees whatsoever. As homeowner’s and tenants vacate their properties at the direction of their banks, they are less than hospitable to the properties on their way out of the door; water has been left on to flood the property, holes are punched in walls and rotten milk left on the counter. We won’t even go into the atrocities of the bathrooms.

What does this mean to you?

Have a strong stomach, exercise your due diligence beyond a reasonable doubt and have plenty of safety margin in your offer price to take into consideration visible and unanticipated rehab costs.

You will probably see some mold. However, ask any veteran investor and they will tell you that mold is a non-issue, under most cases, and was just a fabricated phenom over the last 15 years to feed some unscrupulous Real Estate professionals (smells like the lawyers were bored). You may also encounter vandalism. As copper prices reach higher values, desperate souls are gutting abandoned foreclosures of their copper to put food on their tables, or worse, rims on their wheels. It is not uncommon for foreclosures to experience multiple incidences of vandalism both prior to rehab and during rehab, as well as being inhabited by vagrants.

Good news? I haven’t heard that for a while!

If this hasn’t scared you yet, then you may have what it takes to come out of this economic recession on top. I have just demonstrated the worst possible scenarios, now for the good news. In areas where YOU might purchase and live, you will probably not run into any of these situations. Instead you will only encounter mostly cosmetic repairs, holes in walls and general disarray. Sorry to bore you, but I had to fleece out the wannabe investors. You know, the ones who did their part to get us in this challenging economic crisis by buying multiple properties that they couldn’t afford with ARM’s.

Now if you have cash, then you can go gung ho, but you will most likely overpay. And heaven help you if you go to one of those foreclosure auctions, which is only good if you want to practice your up-bidding hollar. Foreclosure auctions and paid listing sites are a “Fools Paradise.” You need to find your foreclosure listing through the MLS and the banks websites directly. There is a right way to buy foreclosures and there is a wrong way. I recommend that you consult a real estate investor or invest a fraction of your hard earned cash into some real estate education, particular to foreclosures, like a foreclosure tutorial.

I have put all of my own expertise into an online course if you want to learn how to buy foreclosures using little to none of your own money and not spend the years of your life learning how to do this through costly mistakes and bad decisions. This course includes direct links to FREE foreclosure listing sources and bank REO listing pages (NEVER pay sites for listings), step-by-step directions on how to buy foreclosures without using your own money for acquisition and rehab, and even includes a spreadsheet to validate the soundness of your numbers. I tell you about a lot of the pitfalls and potential trouble spots that other programs don’t cover. You can try to learn a some of this on your own over the span of several years, but today’s opportunities won’t be there, and you may make costly mistakes that could have been avoided. As with most things in life, the bottom line with time and money is pay now or pay later.

Spend But Spend Wisely

I hope that you have enjoyed this primer on “why now is the best time to buy a foreclosure.” There are tremendous values out there right now, if you know what you are doing. Buying a foreclosure is a great investment, whether it is for your own primary residence, or as a perpetual cash flowing investment property. You will be doing the economy, and your country, a great service in helping to restore this great country to all that it can be. Make sure that you obtain the proper education, exercise your due diligence and account for any unknowns or major repairs in your calculations.

Now go out there and create your own economic stimulus package through foreclosures!

Happy Investing!

So, you want to take advantage of the historic drop in property sale prices due to the glut of foreclosures?

Well, before you charge head first into the new and unchartered area of foreclosures, there are a few things that you should investigate.

1. Why Are You Interested In Foreclosures?

Are you just feeding into the frenzy because you feel that you can get something at a cheaper price?  Will you be buying something that you wouldn’t normally buy, just because you can get “a good deal?”  This is the worst reason to buy a foreclosure.  You should be buying it for the right reason;  This may be an opportunity to buy a house in a desirable area that you have always wanted to move to, and get it at a great price.  Or you might be interested in acquiring some rental properties.  If this is the case, have you managed rental properties before? Are you ready to deal with the pain and/or expense of being a property manager?  Regardless of your choice, make sure that you know what you are getting involved in, get proper guidance and do it for the right reasons.

2. Sourcing The Most Important Information That You Should NEVER Pay For

NEVER PAY FOR FORECLOSURE LISTINGS!  That is the cardinal rule that professional real estate investors follow and so should you.  Sites that charge a fee for foreclosure listings usually aggregate them from sources that are freely available on the Internet anyways.  Furthermore, these pay sites can contain foreclosure listings that are out of date, so don’t waste your time or money.

The major brokers of foreclosure properties are banks who have their listings available for FREE out on the Internet, the hard part is finding them.  Sign-up at the bottom of this article for our FREE Foreclosure Tutorial we’ll get you started by emailing you two FREE MAJOR foreclosure listing website sources.  These two publicly available sources will also give you a sense of where you can find other FREE foreclosure listing sites on your own out on the Internet and will provide you more foreclosures in your area than you will know what to do with.

3. “Caveat Emptor” – Buyer Beware, Foreclosures Are Sold “as-is”

Unlike other real estate transactions, foreclosures are sold “as-is.” That means that once you make a purchase, you won’t be able to go back to the Seller for newly discovered repair items.  Also, during the purchase, the Seller will most likely not provide any consideration for any damages or repair items that you discover during your inspection (you will be getting an inspection, won’t you?  Of course!).  Therefore, you must prepare for the worst, exercise your due diligence more than during a traditional real estate purchase and budget for unanticipated repairs, which can equal more than double the actual purchase price for some low-cost foreclosures.

4. How Will You Pay For Your Foreclosure?

If you have mountains of cash, good for you!  Some people feel that this is the best way to purchase foreclosures.  I prefer leveraging my money to purchase multiple foreclosures.  In fact, wouldn’t it be better if you could use someone else’s money to buy several foreclosures?  There are several ways that investors do this for investment properties all of the time, but we won’t go into that advanced topic here.  You are most likely interested in purchasing one foreclosure as your primary residence, and traditional lenders may not be as willing to help you purchase a foreclosure and pay for the repairs that it may need.  So what do you do?  Don’t worry, there are still programs available to help fund your purchase and the rehab of a foreclosure as your primary residence.  One, in particular, is the HUD 203K.  We have found several other programs that offer help, such as down payment assistance.  Do some research on the Internet and you just might be delighted at what you find.

5. What  Is Your Exit Strategy?

Are you looking to buy a foreclosure as your primary residence? (i.e. are you going to live in it?) Or is your objective to acquire multiple foreclosure properties and build your real estate investment retirement portfolio?  There are many different exit strategies, and you should have a backup just in case your Plan A doesn’t work.  If you can’t imagine your Plan A not working out, then let me provide a scenario.  Let’s say that you purchase a foreclosure as your primary residence, and, after the rehab, your sensitive nose or allergies are activated every time that you step into the property (this has happened!).  If you can’t make due, then you need to implement your Plan B.  This is just one scenario, and, if you don’t think that something like that can happen to you, trust me, it can.  How about if every time you “turn over a stone” you discover some new repair item that pushes your pocket book beyond its limit.  If you can no longer afford to feed this “green alligator,” it might be time to look at your Plan B, which could include renting the property out or selling it.  In either of these cases, you had better make sure that you have enough “cushion” in your offer price to account for the unknown.

Conclusion – Live, Learn And Prosper

The purpose of this article is not to scare you, but to make you prepared for the unimaginable issues that you will inevitably encounter as you invest in foreclosure real estate.  You only have to look as far as the real estate focused reality shows on Bravo and HGTV to see what I mean.  You can rough it out and learn as you go, or get a bit of a head start by learning from people who are already succeeding in real estate investing.  Find a real estate investor as a mentor, or take a class.  This will be the best return on investment (ROI) that you will EVER receive.

We have taken all of our real estate knowledge and put it into two educational courses.  The first track is a FREE Foreclosure Tutorial where you will learn “How To Buy Foreclosures” as your primary residence.  The Foreclosure PRO Tutorial is an advanced, comprehensive eCourse that teaches you how to buy foreclosures like professional investors do, using little to none of your own money, and gives you access to the link vault, which is an invaluable resource of foreclosure listing sites and real estate tool website links.  You will also learn how to figure out your offer price and accommodate plenty of safety margin in your deal to account for amateur mistakes and the unknown.  When you sign up for the FREE version, you will begin receiving these invaluable lessons daily to your inbox, including information on how to get the PRO version.

In closing, take advantage of the opportunity that exists in today’s real estate foreclosure market.  You are unlikely to ever see this again in your lifetime.  Just make sure that you educate yourself prior to making the leap, because mistakes in foreclosures and real estate can be the most costly.  And most importantly, take action!

Happy investing!!!