“Get 50% off on your second home! No down payment needed! Hot deals on foreclosed properties! Hurry, great investments!”
Who isn’t intrigued by these ads? Unfortunately, these are merely sugar-coated words that can sometimes lure a prospective buyer to purchase a property without thinking carefully. It is important that the buyer does an ocular inspection of the place to physically assess the condition of the property before buying.
A cheap price for a home may sound like a good deal at the start, but do you have the money to spare for all the necessary repairs? Be warned that there are a lot of houses in the market that are abandoned and already tattered.
Buying a foreclosed property can give you great savings, but before taking the plunge you need to fully understand the possible risks.
Facts About Foreclosures
A home purchase is often the most important and most expensive transaction a person may enter into. Most often, people acquire a home through a mortgage, in which the home and land bought by the owner automatically becomes the collateral of the loan. In the event that there’s a default by the buyer, the bank or lending company can swoop in to repossess the home and make a resale in a process called foreclosure. The bank’s goal is to acquire borrowers because that’s how it can earn without the need to manage a property or asset.
Banks eagerly dispose of foreclosed properties to cover for losses. The global crisis that greatly affected the real estate market in 2008 brought in a flood of foreclosed properties.
In case you’re planning to purchase a foreclosed property, it’s best to do the following:
- Visit www.hud.gov (website of the U.S. Department of Housing and Urban Development) to get general market information and property listings.
- Browse the foreclosure listings in local newspapers and real estate magazines. You may also do a quick online home search to browse through numerous listings of properties.
- It would be a lot wiser and safer to buy a property from a lender who has possession of the mortgage on the property instead of purchasing through an auction.
- Make an assessment of the home’s future profitability by conducting an ocular inspection.
- Compare the potential market value of the foreclosed home against brand new properties to know how much you will save from the purchase.
- With the purchase of a foreclosed property comes additional paperwork, so brace yourself for unanticipated concerns and the possibility of an extended closing period.
- Get the professional services of an experienced real estate agent specializing in the purchase of foreclosed items. Never transact on your own unless you have expertise in real estate.
Lastly, understand that those night-time commercials and announcements are meant to lure potential buyers to the seller’s advantage. Most of these promises are too good to be true. Therefore, always be in the lookout for loopholes.
Another option to consider when shopping for a low priced home is to look into fixer-uppers. As its name suggests, a fixer-upper is a home that is in bad shape and requires thorough repairs. Because of the extent of repairs needed, fixer-uppers are sold at low prices. This type of home usually gets advertised in the “Handyman Specials” category.
The buyer should evaluate the actual state of the home in order to estimate cost for repairs. This ensures the buyer that the property will turn into a good investment and not a liability. If you found a fixer-upper that you’re interested in, inspect the area and where it is situated. Location plays a major factor in raising the value of the home after a makeover.
What are the tell-tale signs if a fixer-upper is worth the time and money? You can start by finding the answers to these questions:
- What kind of repair is needed? Does it require a cosmetic or structural repair? Cosmetic repairs are inexpensive and can be done in a short period of time. Will fixing the dilapidated areas increase the resale value or will it only add up to the cost of expenses?
- Should you hire workers to do the fixing or should you do it yourself? Regardless of your choice, it will still require money, time and effort.
- Are you patient enough to stand all the commotion of repairs or would you rather choose a home with minimal repairs needed?
- Are you ready for the cost that these repairs will incur? Renovation may take longer, which could only mean more expenses. You can’t just wait until it’s over.