The amount of homes that have gone into foreclosure are no longer at record levels, but that doesn’t mean there are not still incredible deals to be had.
In just about every city, you have a number of homes that the bank simply wants to get rid of because it is costing them money they may never recoup. Just because the bank is motivated to sell the house does not mean the foreclosure is an automatic bargain. Banks don’t just give homes away.
Consider the following tips for buying a foreclosure so you don’t throw away your investment and wind up with a money pit.
Considering the Value of the Surrounding Homes
One of the most important things to do when buying a home is to look at at market analysist provided by a real estate agent. This information allows you to see if the price you are paying is in line for what similar houses have sold in recent weeks and months. This will provide some insight on the level of demand for the area as well as the number of homes for sale.
The same applies to buying a foreclosure, maybe more so. Consider what the bank wants for the house and how much time and effort and money it will take to bring the home to its former glory. If it is more than the value of houses in the area, you will be losing on this investment.
The goal here is looking for a foreclosure that is much lower than the value of the homes in the neighborhood. The cost of bringing the home up to par must be substantially less than the price difference between the home you are looking at – and other homes selling in great condition.
Working with a Skilled Real Estate Agent
Crunching the numbers can be a challenge when you don’t have accurate information or even know where to begin. The first step is to gather all the details about foreclosure properties that have recently sold. You will also want to see the details of the properties that have recently sold – that were in move in condition.
Your local real estate agents get updated information about properties on a daily basis, so they will be in the best position to help you get first look a the property, and can then help you determine if it is worth your time and money. Your real estate agent can look for properties in certain neighborhoods, at certain prices, and message you the second they are available.
While you are looking at the locations given by a real estate agent, they can be gathering more details to help you determine if the property is a solid investment.
Investing in a Proper Home Inspection
One of the other benefits of working with a local realtor is they have inroads to several professionals who can help you to determine if the property is worth the investment or should be avoided.
Despite a low asking price by the bank and the fact the home looks in good shape, things just beyond your field of vision could tell a different story.
Your agent will put you in touch with a respectable home inspection company that can take a closer look at the property from the inside-out. These experts will check the roof, the foundation, the plumbing, the electrical system, and provide you a detailed report about their findings.
Considering the Cost to Make the House Livable
Every foreclosure property is different, some houses have been abused and neglected on the market for years, others are in excellent condition and the homeowners had to move due to financial difficulties.
The bank is not interested in the condition of the house when they list it on the market, they simply want to move inventory and get it off of their books. Look at as many homes as possible because a few miles down the road you might find a similar house that doesn’t need to be painted, have the carpeting replaced, or landscaping redone.
Carefully consider the cost to bring the home up to par with the other homes for sale in the neighborhood. You will want to have multiple contractors look at the property and provide a quote. It can add up very quickly when you have to put down new flooring, paint every room, repair the roof, or replace broken windows.
Once you have a handful of repair prices from reputable contractors – you will want to add 10% to that price as there are always unexpected expenses that come into play.
Analyzing Investment Versus Resale Value
Whether you are looking for a foreclosure to purchase for you and your family to live in or you are looking to flip the property for a profit, you will want to make sure you get a good deal.
Like any home, you will eventually be selling the property and hoping you make more than you invested and paid for the house. The same applies to the foreclosure, maybe more so.
It doesn’t matter if you are selling your home right after making all the needed repairs or years from now, you don’t want to be in a position to lose money. One of the things your real estate agent can do is show you how the market fluctuated in this region over then last decade so you can see the highs and the lows of the market.
The thing to consider when selling your home is if this investment is short or long-term. If you plan to live in the property as your main residence, time can help increase your investment. If you are NOT to be living in the property, you will most likely be paying a slightly higher interest rate on your mortgage and for homeowners insurance.
Buying a foreclosure can be a great investment for some people and could wind up saving you a small fortune if you proceed with caution. Working with an experienced real estate agent with experience in residential investment properties and taking your time to check every inch of the properly correctly will increase the odds of this investment yielding a high return for you down the road.