With the huge volumes of foreclosed homes awaiting buyers in the market investors are in a great position to boost their business by investing in distressed homes. Foreclosures is a staple of the housing market. When you have home owners who find themselves in dire financial straits and can no longer meet their mortgage obligations, foreclosure proceedings are about to follow. Banks are the major sellers of foreclosed property and this is because they are also the leading provider of housing loans to individuals.

The government through its various agencies also sell foreclosed homes to the market. Government foreclosures are caused by either mortgage default or tax debts. Being the government, they usually have these foreclosure homes tied up to a housing program designed to enable middle- to low-income individuals and families who would not be able to afford owning a home any other way. Housing opportunities are created through government backed loans such as those offered by Fannie Mae and Freddie Mac, that operate only in the secondary mortgage industry.

Potential for Profit

Distressed homes are sold at a significantly lower price than their true market value because the seller would only wish to recover the portion of the previous loan that is left unpaid. They are conveyed to the market through home auctions organized by both banks and government agencies such as the Internal Revenue Service or Plus the homes used to belong to previous owners and may have sustained some damage and wear and tear. But with repairs they can be resold at fair market value or rented out to tenants.

Individuals and corporations alike normally purchase foreclosed homes through financing. Buyers need to be pre-approved for a home loan by any mortgage provider to be able to make an offer for a distressed property. Buyers will also bear the cost of home inspection, title search, value appraisal and a comparative analysis of the value of like homes in the vicinity.