Tips for Purchasing Foreclosed Homes
Foreclosure were flooding the market within several years following the bubble burst around the end of 2007. While foreclosures are back down, there remains an opportunity for anyone open to this unique cache of properties. Still, buying foreclosed homes is not easy nor does it guarantee wealth.
When shopping for a foreclosed home, there are certain precautions you should take to avoid common pitfalls
Understand the Process
Foreclosure is the term used to describe the process by which an individual loses their ownership of a property due to the inability to meet the mortgage obligations. After this happens, the lender then resells the property at a foreclosure auction.
When a house in your neighborhood has been foreclosed, your first speculation may be that they were negligent with their mortgage payment. However, the truth is there are a number of reasons why someone may decide to foreclose on a property. These includes medical issues and expenses, divorce, unemployment and death.
Some foreclosed properties will require renovation. Do not be deceived by the low price tag: paying for necessary repairs might cost more than you bargained for. Ensure that you are getting the right value for your money.
Before you decide to start shopping for a home decide how much you can afford to invest. Repair costs and property taxes should not require more than 35% of your current earnings before you deduct taxes.
Find an Expert
Find an expert like a local agent who has experience handling foreclosure real estate. The expert will be able to walk you through acquiring all the steps required to purchase a foreclosed property and help you determine if you are getting value for your money.
Conduct a Search on the Property
Through the local county, check all filed paperwork on the property. This will help determine many key things, such as property history, potential bid price (loan amounts), permit required renovations, etc.
In some cases, the lender may be able to disclose the current condition of the property. Most foreclosed homes are sold without repairs and all renovations will be your responsibility.
Inspect the Property
If the property is vacant, inspect the property while on-site. Look through windows and walk the property looking for any problems.
The Inspection should help you determine the cost of repair. If you are unsure what cost could be, call a contractor and have them guesstimate.
To decide if buying a foreclosed home is right for you, ensure that you weigh all the pros and cons. While you may think you are getting a good deal it might actually be the opposite. Follow the tips above to minimize your risk.