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Foreclosed properties are among the most common investments that house flippers make. However, understanding the foreclosure process can be intimidating. Maybe you’ve even had friends and family members warn you not to invest in these properties. In this article, we will explain the basics of the foreclosure process in simple language so you can decide if investing in foreclosed homes is right for you.

What is Foreclosure?

When a person purchases a home, they usually take out a mortgage, which is a special bank loan designed for homeowners. If a person cannot pay their mortgage, the bank can take possession of the home through the foreclosure process. While some states require the bank to go through the court system during foreclosure (called a judicial foreclosure), Texas and 27 other states do not require this (called non-judicial foreclosure). This means that foreclosures tend to move faster in these states.

Investing in Foreclosed Homes

One of the main reasons that foreclosed homes are common investment properties is because they are typically sold well below market value. Why is this? Usually, it is because the bank is simply trying to cut their losses. Selling the foreclosed property quickly will get it off the bank’s hands and allow them to make back some of the money lost. There are pros and cons to investing in foreclosed properties. We will explore these in future blog posts.

Texas Real Estate Investor Loans

Whether you decide to invest in foreclosures or not, real estate investments, in general, can be lucrative. Red Door Funding offers real estate investor loans to help you purchase and renovate Texas properties. Learn more about what we offer by calling 832-539-1099.