The challenge today isn’t finding foreclosures. The challenge is trying to find good foreclosures in which to invest. A key rule to live by is “all foreclosures are not good foreclosures”. As a homebuyer or seasoned investor, you should approach this type of property with your usual investment caution and then some. The basic anatomy of a foreclosure stems from the owner of the property discontinuing payments on their mortgage to the point the lender sees fit to file a notice of default. From there, the lender has to go through a legal process before it can claim that property from the “owner of record”, rehab the property and get ready to re-market it to the public. There are many reasons payments aren’t made from job loss to outright fraud.

Lenders often choose strong local area real estate companies to try to dispose of these properties; also know as non-interest-earning-assets. As time passes, lenders feel more and more pressure to unload these properties since investors in that lending institution want to know why the bank is holding on to a depreciating asset on which no one is paying them interest. The investors and the bank would rather have what cash they can get out of that asset and re-invest it.

So how do you find your best deal on a foreclosed property? There are numerous websites who offer subscriptions to their vast database of foreclosures. They charge you a monthly fee and let you have at their database. The best way to find these companies is to go to your favorite Search Engine and enter the keyword “foreclosure properties” or “REO properties”. You will find a number of website (including lender websites) that will direct to lists of thousands of properties. If the property has been foreclosed it’s called an REO and it is generally available for sale from the lender or lender’s agent.

As we mentioned, REO’s find their way back to the lender for many reasons. It can be as straightforward a job loss situation where the borrower no longer has the ability to makes their loan payment. However, the reason can be much more sinister where a borrower actually plans to defraud a lender. The borrow purchases a home and then goes through a process of artificially inflating the value by completing fake transactions or possibly collaborating with an appraiser to obtain an “artificially” high valued appraisal. The borrower then applies for a new refi-loan for the maximum possible amount. Once they have received the loan, they vacate the property, transfer the money to an offshore account and disappear.

Now you appear, the homebuyer or foreclosure investor, wanting to buy an REO. You can tap into services such as:

1) www.foreclosure.com
2) www.foreclosuretrackers.com
3) www.realtystore.com
4) www.realtytrac.com

These companies sell subscription services to homebuyers and investors allowing them to research REO and pre-foreclosure properties all over the United States. Once you locate prospective properties, you can do further research on you own or contact a local real estate agent.

Certain companies can provide you with instant valuation reports, local market strength reports and risk reporting in the area surrounding the property that interests you.

1) www.homesmartreports.com
2) www.ussearch.com
3) www.electronicappraiser.com

The above area few companies you can use to do added research though only HomeSmart Reports provides risk assessment in the neighborhood surrounding your property. Here are a few added tips in searching for REO’s (post-foreclosure properties) or pre-foreclosure properties.

1) Always have a physical inspection of the property done and review it before you close escrow.
2) Stay within your budget, there are plenty of properties out there.
3) Be absolutely certain to research values and market conditions in the area before you buy or sell.
4) Use a real estate agent if you think it will be to your advantage as they often know a lot about the local market.
5) Value your time. You can do a lot of property research and analysis on the Internet before you get in a car or on an airplane.

Be prepared to act when you find the right opportunity.