Everything to Know About Buying a Foreclosed Property with Hard Money
Have you ever found yourself in the position to capitalize on the purchase of a foreclosed property that was slightly out of your price range for buying? Maybe you saw a house that suddenly got foreclosed, decreased a lot in value, and appeared ripe for the picking . . . if only you had a little more for payment.
A H L Hard Money Network is here to help because we specialize in these sorts of financing scenarios. Here is everything you need to know about buying a foreclosed property with hard money.
Finding & Financing Foreclosed Properties
First, you would need to locate foreclosed homes, which is easier than ever with the availability of more than a dozen phone apps dedicated to the task. Next, you have the issue of financing the one(s) you wish to purchase. We tend to focus on the very effective method of using hard money loans to finance them. This is where you submit various forms of collateral, including the property itself potentially, to the hard-money lender in exchange for the loan. Collateral is very important because there are several elements of risk involved with this endeavor.
Should You Use Hard Money Loans For Auction Purposes?
Since this is usually a short-term mission for most buyers (flipping properties, for instance), this is a very effective means for financing an auction purchase. However, if you are in the market to buy a home for your own living arrangement, you might be better suited with a more traditional approach such as a bridge loan. Hard money loans are ideal for those seeking to perform major renovations and subsequent short sales on these foreclosed properties.
Short Sale Vs. Auction
A short sale involves selling the property pre-foreclosure. In other words, before the foreclosure occurs, but after the bank’s foreclosure proceedings, investors have an opportunity to purchase the distressed home at a cheaper rate. The banks have an incentive to do this to prevent incurring a total loss from lending to the previous owner. You want to offer them enough to make it worth their while, but still capitalize on a discounted price.
Auctions take place after the foreclosure procedures have begun. Contrasted with the short sale (where you can make an offer before others), the auction environment means that you will likely have stiff competition from savvy institutional investors. It can be a better payoff with much more risk involved.
Paying Back The Loan
If through unfortunate circumstances, you are unable to pay back the loan in sufficient time, the hard money lender would have the right to collect the collateralized properties and sell them to pay the remainder of the loan balance. To avoid this, it’s critical to pay attention to getting pre-approved for hard money loans in advance of any attempted auction purchases. Again, it’s a riskier affair, so it pays to do this the right way.
Are you in the market for foreclosed properties and wish to make either a short sale or buy at an auction? Using hard money loans can be a lucrative way to do so, but we highly encourage you to seek out a safe and winning strategy with a professional. That’s why A H L Hard Money Network exists in the first place. We seek to guide you through the process and ensure your buying and selling endeavors are as fruitful as possible. For more information, give us a call at (813) 516-5210.