Buying foreclosure properties may sound like an easy way to save or make money, but this isn't necessarily the case. There are a number of potential pitfalls that could prove extremely costly for the buyer. This article advises readers how to find foreclosures. It will also explain why buying a house through a real estate agent, rather than at auction, is the preferred option.
Buying Foreclosure Properties
An investor will typically pay about 10% less than would be the case through a traditional house sale. However, this 'potential' saving comes with a huge wealth warning. Without a thorough inspection by a seasoned professional, it is almost impossible to make an accurate assessment of that property. A house that isn't maintained can develop any number of potential problems. A number of homes have even been deliberately sabotaged by the previous resident.
Foreclosure Home Auction
Buying a house at a foreclosure auction is difficult for a seasoned veteran, let alone someone who lacks sufficient experience and expertise. A home may look fine in the picture, but this doesn't necessarily mean that a home is well maintained. Many auctioned properties are in a deplorable state as they were vacated long ago. This could mean that the money saved is eroded by maintenance costs.
Buying a Foreclosure Property from a Real Estate Agent
The majority of lenders will establish special relationships with estate agents that they know and trust. Check to see whether this is the case. The lender will usually ensure that any essential repairs are performed to a property in order to secure the best price. Unlike a foreclosure home auction, the buyer has an opportunity to inspect a real-estate owned (REO) property.
Foreclosure Bus
A tour involves a local estate agent taking prospective buyers to see a portfolio of distressed properties. This allows the buyer to determine which properties are likely to be of interest. Try to establish a good working relationship with the agent as they are more likely to be candid regarding what repairs are required and whether the property represents a good investment or not. Identify one or two suitable properties and ask to view them at a later date.
Before buying foreclosure properties, find out what comparable homes are fetching in the local area. Once repairs have been factored in, it is then possible to determine whether purchasing a foreclosed home represents a viable investment opportunity.
Sources
Donev, Stef. "10 smart ways for buying a foreclosure." Interest.com
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional before proceeding.
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