by Glenn Plantone

Created on: May 15, 2009   Last Updated: May 19, 2009

Within the realm of real estate investing, each type of investment (foreclosures, fixers, land, REITs, etc) has its good and bad times to buy. To be a successful investor you need to be able to identify not only which type of investment is the best at any given time but also which sub-category within that investment type you should look to specialize in, and when in the market cycle to buy.

Perhaps you are new to real estate investing (or not) and have heard that foreclosures currently abound and offer the best way for investors to gain instant equity in a property. This may well be very true. But the designation "foreclosure" is a general term comprised of many types of properties. Understanding the different types of foreclosures, where in the time line a particular foreclosure stands and which type of foreclosure offers the bet deal is critical to your success as an investor.

Along the time line of the foreclosure process, there are three basic areas that present buying opportunities for investors. The first of these has investors buying before the foreclosure auction. The second opportunity comes through buying homes directly at the auction. The third and final possibility is to buy properties after the auction is over, either directly from the bank or from an auction company. These bank owned properties are referred to as REO's or Real Estate Owned. Each of these stages in the process provide unique benefits as well as challenges. The smart investor will need to contrast the pros and cons of each method in order to find the best and safest investment opportunities within the broad field of "foreclosures."

The first opportunity for foreclosure investors, buying before the auction, encompasses the period of time when home owners are behind on their payments and realize they are in danger of losing their home but have not yet been foreclosed upon. This sub-category will include listed properties from the multiple listing service (MLS), short sales, notice of defaults (NODS) and notice of trustee's sales (NOTS). For a number of important reasons, this is not a good time for anyone to be attempting to sell a home through "normal" retail channels. The sluggish nature of the housing market, the excess low priced inventory on the market, lending restrictions, and the anxiety of potential buyers willing to sit on the sidelines and wait for conditions to improve combine to make selling retail nearly impossible for most home owners. Sellers cannot compete

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