One trend within the industry is the rise in popularity of the illusive tax lien.  For the knowledgeable investor, tax liens can be quite the lucrative investment.  Of course this all depends on the state in which the investor resides.  Some U.S states are more conductive to tax lien profits than others.  Some of the more fruitful states for tax lien certificate investing include Illinois, Indiana, Florida, and Arizona.  These states have certain features that make them more appealing such as optimum allotted annual interest rates.

Illinois for example allows for a staggering 36% annual interest rate in addition to an added early redemption interest rate.   Indiana and Florida follow close behind with an annual interest rate of 15% and 18% respectively.

Along the same vein as Tax liens, tax deed investing can prove to be another advantageous route to consider for the creative investor.   These tax deed properties can be purchased (and owned) for as little as the taxes owned.  Although, some properties are redeemed during a pre-determined period there is still a high return to be made.  In states such as Georgia, Texas and Delaware, the tax deed investor is awarded a redemption fee (in addition to the final bid) if the owner reclaims the property post-auction.  This fee can be as much as 25% of the initial investment.

However, the real pennies-on-the-dollar return comes when the redemption period expires and the owner has free and clear title to the property.  Depending on the amount of the final bid, the new owner can now flip the deed property and sell it for fair market value and see quite a large profit margin depending on any repairs, etc.

One reason tax-defaulted properties have been quite the investor’s pot of gold, is due to the lack in accessibility of tax lien data.  Up until now researching properties with tax liens has required many-a-trips to the county courthouse and has required referencing several different resources.   Now there are several sites that provide tax lien data along with foreclosure data and other distressed property data.  One helpful site I have come across is taxliens.com, which provides a variety of tools and resources for the diversified investor.

Whichever route an investor chooses to take, they should surely take advantage of the age of technology where an arsenal of potential profit is only a mouse click away.

According to a report from the Mortgage Bankers Association, a record high number of homeowners were facing foreclosure in the last quarter of 2006.

During the fourth quarter nearly 14 percent of roughly 6 million subprime loan borrowers were defaulting on their payments. One of the main reasons for the rise in foreclosures is due in part to the higher interest rate resets. Critics also conclude these subprime borrowers were even more “susceptible” due to their less than par credit and were lured in with initial low “teaser” payments.

Some of the states hardest hit by foreclosures or what is deemed as a “pre-foreclosure” seemed to be scattered throughout the nation with Mississippi and Louisiana reflecting the highest default rates followed by Michigan.

Meanwhile, the stock market plunged last week partialy due to the impact of the subprime mortgage crisis. One company that has gained a majority of the press is New Century Financial Corp., of California. New Century and Fremont General represent roughly 14 percent of the entire subprime bond market. The New York Stock Exchange has even suspended New Century from its stock listings after the company reflected a recent 90 percent plunge in its stock value. The company is also under a preliminary investigation for its lending practices.

On the up-side the market may be ripe for distressed property investment. Foreclosures can also provide a great housing alternative for first-time homebuyers or a lucrative investment for the every-day real estate gurus.

When dealing with pre-foreclosures it’s beneficial to get familiar with the various options involving all parties that have a stake in the property. One type of foreclosure negotiation that most investors are familiar with is the private party buy-out. With an owner facing foreclosure, the individual investor has leverage when negotiating a purchase price.

For investors, it’s best to seek out the pre-foreclosures that have a good amount of equity built in order to make the investment worth their while. The more equity in the property the more both parties can benefit. The owner may be able to avoid foreclosure and come out of the transaction with little extra cash to start-up once again. However, when there is very little or no equity, other options must be considered.

The less known and fairly alluring option is a short sale. Recently this strategy has gained some attention due to the current real estate slump where some markets have actually seen a decrease in home values. A short sale is basically when the owner owes (due to a variety of reasons) more than they can sell the house for. If this is the case the lender will basically take what it can get to help curb the total loss relative to the total costs of a foreclosure.

Here is a scenario to better illustrate the short sale process: We’ll call him Bob Venture. Bob has purchased an investment property for $150,000. He takes out a mortgage for $130,000 and rents the house to cover the cost of the mortgage. After about a year or so the tenant looses his job and falls behind in payments for several months. After a disastrous eviction process the property is left with quite a bit of damage and the appraisal price is now way under $130,000.

Meanwhile, Bob has had some health issues for the last 6 months and is also not able to work. Let’s just say when it rains it pours because now that Bob is trying to sell his rental property there have been no prospects and he is now facing foreclosure. Home prices in his area have been at a standstill and with the extra damaged incurred to the property the home is now worth less than the total amount owed.

At this point Bob considers contacting the lender about a short sale. The lender assigns the case to a loss mitigation specialist to analyze the different options. The lender may choose a foreclosure, a loan restructuring agreement, a deed-in-lieu-of-foreclosure, or a short sale. In order to assess the option that is in the best interest of the bank the specialist must answer a few questions. Is Bob capable of a loan restructuring considering his present situation? What are the legal fees involved in a foreclosure? Is there a second mortgage or unpaid taxes?

Here is where the investor comes in. Chuck Chance, a friend of Bobs, decides he wants a piece of the real estate action and offers to purchase the home for $125,000. With all factors considered the bank accepts the offer and all parties seem to have benefited.

And that my friends, is the short story of a short sale and some of the faces of pre-foreclosure. So here’s your opportunity to turn one almost-tragic scenario into a creative real estate investing venture of your own

The main issue here was the effects of subprime lending in what you could call some rather hasty lending practices. With the housing market bursting with opportunity it seems lenders were rushing to offer home loans to whomever qualified, which apparently was just about anybody.

According to the report on N.P.R. 1 in 5 subprime loan borrowers will end up in foreclosure in the coming year. The Center for Responsible Lending estimates that those number account for roughly 2.2 million homeowners falling victim to risky subprime lending across the nation.

It’ not just subprime borrowers either; the recipients of adjustable rate mortgage loans are also finding themselves in quite the bind. In many cases borrowers received high-risk adjustable rate loans packaged in an attractive low start rate. Many were approved without consideration of whether or not they could afford these loans after they would inevitably “reset” for the worst.

Forecasters estimate that over $1 trillion in ARMs will “reset” with increased rates this New Year, making 2007 quite the playing field for real estate investors nationwide.

The reason behind many of these adjustable rate mortgages heading into foreclosure is due impart to the difficulty of refinancing into a traditional 30-year fixed mortgage. Unfortunately, the homeowner’s payments would still be higher than their initial low monthly payments.

Additionally, many homeowners will not qualify for such refinancing due to the current housing market slump. In some markets home values are now less than what the homeowner paid when they bought the home during the real estate rush. Those who received 100% financing will especially be feeling the pressure this coming year.

On the upside the market is blossoming with opportunity in another realm. Investing in foreclosures will certainly be on any real estate investor’s to-do list for 2007. The rise in foreclosures will also provide affordable housing alternatives for those homebuyers left in the dust from the last real estate boom.

There are several avenues to take within the rather large realm of real estate investing. Whether you execute more traditional types of real estate investing such as buying low and flipping or accumulating rental properties, there are several profitable routes to take. Consider using a combination of strategies in order to diversify your real estate portfolio and ultimately maximize profits.

One significant trend forecasted for the coming years is the rise of foreclosure investing. Due impart to exotic loans and the rise of interest rates, the amount of foreclosures nationwide is predicted to sky rocket in the coming year.

Perhaps you’re more interested in a preemptive move? Along the same vein as foreclosure investing is the trend of pre-foreclosure investing. Some of the same sites that offer foreclosure lists also offer pre-foreclosure listings. You can even get helpful tips on approaching owners who are in a financial bind. With pre-foreclosure investing you can avoid the auctions and wield more control over your transaction.

With all the resources available online, foreclosure and pre-foreclosure investing is much easier than once considered. Some websites such as foreclosure.com contain listings for foreclosures and pre-foreclosures. They are the only site I know of that lists the two types of distressed properties separately facilitating much easier research. Foreclosure.com also has helpful tools and resources making them a one-stop real estate investment shop.

Along with foreclosure and pre-foreclosure investing seems to be the trend of holding the property as opposed to flipping and selling it right off the bat. Because the market has seen a rather abrupt slowdown the profit is no longer in the flip. Consider other options such as residual income from a rental property. Or it may be wise to invest more time and money to improve the property seeing as though there is no longer a need for conveyor belt housing.

Whatever your real estate flavor of the month may be, one thing is certain, real estate investing will always be a safe bet.

Take a recent article from The Wall Street Journal as an example. They took three competitors and assessed their level of accuracy based on a sample of homes in Atlanta, Georgia. The Journal found that only one of the three sites correctly reported that the price of a house had been cut to $145,900. The site’s competitor placed the property’s value at roughly $204,000.

The Wall Street Journal wasn’t the only source to uncover such divergences in reporting. Inman News also found some variances in foreclosure classifications between a couple of different sites giving one the upper hand when it comes to accurate foreclosure data. According to the article, one data provider estimated a 24% increase in the number of homes in foreclosure, a 53% increase from the previous year. At the same time another reputable data provider reported a decrease in foreclosures by 6.7%, only a 7.3% increase from the previous year. Reason being, the first provider was reporting data on all stages of foreclosures, rather than foreclosures in bank possession, or post auction. This is a huge error in reporting considering some pre-foreclosures never even make it to foreclosure status and should certainly not be included into national statistics.

Although some minor inaccuracies are inevitable, the trustees of the foreclosures themselves aren’t so quick to the draw when updating the data on their own side. This is due in part to legal factors or as simple as a lack of technology. In either case, foreclosures are still highly sought after and having an accurate data provider is one of the first steps to success.

Discovering other avenues in real estate and utilizing the online platform is key during uncertain market conditions. In a waning sellers market other opportunities will certainly arise. Within the realm of real estate investing, professionals seem to be turning to other ventures such as foreclosures, and collaborating with their online counterparts as a form of advertising and marketing. Utilizing an online vehicle to market a product or service is the way to go. One thing is certain, online advertising remains the most cost effective and successful means of advertising and will continue along that path with the rise of internet savvy users every day.

As for realtors, they will also have to adjust to the changing market. Most realtors are only advertising their most picture-perfect homes because of market saturation. These are the homes that are selling, say some realtors. Realtors are also allocating most of their budgets to the online medium in order to offset costs and drive interest.

Good news for both realtors and investors is the popularity of real estate in general in terms of the search engines. According to reports, “real estate” was the #1 professional service searched this year. Whether they are buyers, sellers, or investors, real estate seems to forever maintain its sense of allure.