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Investments - Foreclosures
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Buying Home In Foreclosure
Buying homes in foreclosure is a business that takes talent and hard work. You may hear everyone talking about it but not everyone is successful doing it. You will need to research and don't take anything for granted. Most properties will sell below market value and you might find some great deals that go for 30 or more percent below market.
Location
Even if you’re buying home in foreclosure as an investment, think about it as your personal home. Is it in a good neighborhood? Have home values in the area appreciated? The property doesn’t have to be in an exclusive neighborhood, but it should be in an economically stable area. This is not an issue of who is moving in and who is moving out, but rather how much is being paid for the homes changing hands.
Physical Condition
Consider the circumstances of a home in foreclosure. Most people lose their grip on their homes after struggling to meet mortgage payments for an extended period of time. That probably means the home has received little or no maintenance, and the property you’re inspecting may appear to be in poor shape. If it’s in a quality location however, ignore the condition for the moment, take note of the obvious signs of deterioration, and incorporate rehab costs into your calculations.
Don’t Underestimate the Competition
Keep in mind that just as in any commercial real estate market, you are bidding against professionals. There are people in most areas who make a living from buying home in foreclosure, cleaning them up and putting them right back on the market. Professionals operating in that fashion may not be willing to bid up near market price for the neighborhood, but with any well located property you’re not going to walk away with a “steal.” Take a look at recent foreclosure sales in the area and see if you can find a pattern in the successful bids – how far below market are they?
Clean Title
With any foreclosed property you need to look closely at the condition of the building’s title. Check to see if there are any liens on it other than that of the lender who is selling it. If you can, determine if the former owner is embroiled in any lawsuits that could conceivably lead to a challenge of the sale and tying up the property. In theory, once a property reaches the foreclosure stage it is going to market unencumbered. You don’t want to get a foreclosed property and have it tied up in the courts for months. PK