Why Foreclosures? Part 1 of the Homes.com Foreclosure Series

by Joe SessoMarch 27, 2012

It’s hard to read a real estate blog or section without seeing something about foreclosures today. Foreclosures have been one of the main reasons why the real estate market has been so bad for so long. Because of this, many people think that foreclosure real estate is a new phenomenon. While it’s true that there are more foreclosures today than ever before, foreclosures have always been a part of the real estate market. Let me share with you my story.

I’ve been interested in foreclosures since 1997, when I saw a late night informercial about how to buy them for “pennies on the dollar.” This infomercial played almost every night, so it took me about a month of watching this program every night before I finally decided to buy the system. I purchased it with a friend of mine (I needed him to help pay for the system) and we began to study the program every night to learn how to become real estate moguls. At the time, I was not a licensed Realtor and had no prior real estate experience. I was just a regular guy fresh out of college who wanted to make a fortune in real estate.

The program itself was basic but made sense to us. We were able to find great foreclosure deals in real estate. The problem was, nobody took us seriously and we couldn’t secure financing. This was before it became very easy to get money, and every bank we spoke with us turned us down because we didn’t have steady jobs. Fast forward six years to 2003.

By 2003, I had been a licensed Realtor for three years. I got my license for two reasons: One, was to build credibility among investors; the other was because I had a passion for real estate. In January of that year, I drew up my own program for buying foreclosures. By year’s end, I went on to buy and sell more than $1.3 million in foreclosure property.

The point I’m making here is that foreclosures are nothing new. They’ve been around as long as banks have been giving loans. People like the idea of buying foreclosures because many times these properties can be purchased for deep discounts of what their true values really are. I have been doing this for many years, long before we entered into the real estate crisis that we are still facing. I think that today’s real estate climate is so much better for foreclosure investors for three reasons.

1. The first is abundance.

There are so many foreclosures out there today that almost anybody who wants to become an investor can. Obviously you have to know what you’re doing. That’s what we’ll focus on in the coming weeks. But if you do your homework, you can do quite well in today’s real estate environment.

2. The second reason is because foreclosures are the best of both worlds

In the 1980s you could buy great foreclosures and get great rental cash flows, but you didn’t get much appreciation. In the 2000s, you got great appreciation for your property but lousy rents compared to your mortgage payment. Today, you can get both. Great rents compared to your mortgage (record low interest rates), and appreciation. Some banks are practically giving their foreclosures away, which means it won’t take much appreciation in a neighborhood for your purchase to look really good.

3. The final reason why it’s great to buy today is public relations.

When I was buying a lot in the early 2000s, many people viewed foreclosure investors as “bottom feeders” or “scavengers.” This wasn’t true in many cases, but that was the perception. Today foreclosure investors are viewed as heroes for saving neighborhoods and improving vacant homes. This is why I feel there has never been a better time to buy foreclosures.

Next week I will be discussing foreclosure auctions and sheriff sales. I will tell you how I made $20,000 on a train ride in a real estate deal. To purchase your copy of my award-winning book, The Foreclosure Revolution, go to: http://www.joesesso.com/books/. Otherwise see you next week.

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About The Author
Joe Sesso
Joe is an award-winning author for his book The Foreclosure Revolution, and he has produced investment training manuals and CD sets on real estate, investing and foreclosures. He has been a real estate professional since 2000, and has both a Bachelor's degree and MBA from Indiana University, as well as a Masters of Global Management degree from the prestigious Thunderbird School of Global Management. Joe Currently lives in Chicago.