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Land Foreclosure

Foreclosure

When most people think about foreclosure, they imagine families being evicted for non-payment of home loans. However, land foreclosure is just as common and for the same reasons - i.e. non-payment of loans - and it provides similar opportunities for investors.

The main groups of people who lose land through foreclosures are farmers and developers. Land is a high risk investment and deals can fall through, financial circumstances can change and crops can fail. If land was purchased with a loan and repayments go into default, the landowner can face the same kind of foreclosure proceedings as homeowners who default on their mortgages or home loans.

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Land foreclosures are sold on in the same way as home foreclosures. It may be possible to pick up foreclosed land for less than the market rate at public auction. Alternatively, you may be able to arrange a pre-foreclosure sale with an individual landowner. Some foreclosed land also becomes the property of banks and government departments and is sold on through brokers as REO (Real Estate-Owned).

As well as private banks and lenders, the treasury department can also foreclose on landowners for non-payment of property taxes. Some of this land is then auctioned on to the public, either through the state department of natural resources or through the local country treasurer.

Foreclosed land is a less popular investment than home foreclosures. This is partly due to restrictions on the purposes that land can be used for, and partly due to the costs of development. Foreclosed land rarely sells for below the market rate because so much investment is required to turn it into a profit-making asset.

Some people purchase foreclosed land for the construction of a new home, but this is an expensive process and there are all sorts of legal issues to consider - for example, are you entitled to build a private residence on the land and does the property have access to utilities such as water, electricity and sewerage?

If you are thinking of buying foreclosed land, make sure that the land can be used for the intended purpose. Read up on the local land laws and obtain professional advice before you invest. Purchasing foreclosed land at auction normally requires full payment at the time of sale so it's usually easier to buy through a real-estate broker who specializes in land sales.