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With all of the morose news about the collapse of the housing market, financial institutions and increase in unemployment, how could anyone think that now is a good time to buy a Foreclosure?

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 foreclosure homes 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!