Risks and Rewards of Investing in Pennsylvania Foreclosures

The main cause of turbulence in the housing market today is due to foreclosures. In the last few years number of Pennsylvania foreclosures has spun out of control due to increasing number of residents defaulting on their mortgage loans. This creates great opportunities for buyers and investors as properties in foreclosure or short sales start swapping the market at cheap rates. But like any other investment, investing in Pennsylvania foreclosures has its rewards and its risks.

Pennsylvania Foreclosures sales can be broken into three groups: Short sales, Public trustee / sheriff auction and Bank Owned (Real Estate Owned) properties. All three carry different types of risk but offer the same reward: You are able to purchase property much below market value.

Short sales carry less risk as well as less reward. In a short sale lien holders are willing to take a short pay off- the investors can then buy the property at a discount, slightly below market value. But short sales typically takes several months to complete since investors must be patient and willing to risk a situation where the bank may not grant approval.

Only one out of every three short sales close, the rest end up at County Clerk's auction of Pennsylvania foreclosures. Investors must arrive at these auctions with ready cash for the full purchase amount. Investors have little opportunity to inspect and evaluate the condition of the property and are forced to buy as-is at auctions with liens and taxes outstanding. There is very high risk as investors may be saddled with properties having great structural damages and they are forced to resell at a loss.

The third category is buying from Banks or REO properties. This type of investment has least risk as the bank takes care of all taxes and liens outstanding. Also prior inspection of the physical concessions of the property and its vicinity is allowed along with option to cancel the contract if anything is amiss.

Investing in Pennsylvania is an attractive proposition due to several reasons. It has a good educational and sporting infrastructure. It has a humid continental climate. In 2008, the GSP of the state ranked 6th in the nation. It would amount to 18th largest economy in the world. Philadelphia and Pittsburgh are home to several Fortune 500 companies.

Pennsylvania ranks 19th in agricultural production overall. Casino gambling was recently legalized in the state. It has 500 public school districts, hundreds of private schools, public colleges, universities and institutions of higher learning. It is home to the nation's first zoo. It has 121 state parks, several amusement parks and art museums. It hosts music festivals and hunting sports. College football and basketball are popular. It leads the country in the manufacture of pretzels and potato chips and is the home of Hershey's chocolates. Investing in Pennsylvania foreclosures gives you the chance to be part of all the action.

Source by Fiona Livnat