Foreclosures – A Dream or a Debacle?

Are you leaning towards stepping into the investment market? You may get the idea that buying a  foreclosure is your best bet for a great deal on a home. Well, it’s possible, but remember that the foreclosure market is full of perilous pathways and competitive investment pros who know what they’re doing.

Whether you’re considering purchasing  foreclosures as an investment or as your personal residence, here are a few tips that will help you get you started on a great investment and likely help you avoid a disaster.

Seek professionals to assist you: Your team of professionals should include a real estate agent, a home inspector, a contractor and an appraiser. You often have to be ready to move on a foreclosure home immediately, so establishing relationships as well as setting a plan of action with these professionals ahead of time, is a must.

Set your sights on a short sale (pre-foreclosure): Short sales offer some of the best deals. The seller is likely to be more willing to accommodate you because they are striving to avoid ruining their credit. This means you’ll have a much better chance of getting a great deal – something more than the seller owes the bank, but oftentimes less than market value. As well, the seller may still be in the home to assist with repairs and in general, these homes are in far better condition than other distressed properties.

Forget the auction: While going to foreclosure auctions are certainly another avenue that investors may take, it definitely is not for the beginning investor. You may find that you’ve done a lot of research and invested a lot of your time for nothing, because the auction was cancelled. You may ultimately wind up with a property that has been trashed because the previous owners didn’t want to move, or because the house has been empty for a very long time.

Be very careful buying bank-owned properties: This option is seldom as great as it sounds. Not all banks price homes at fair market value. Many of them are trying to get their hefty legal fees as well as their lost loan amounts back. With depreciation over the time of the process, paired with decreasing market values locally, the price can be much more than the home is currently worth. Pair this with the speed in which you may have to move, giving little time to perform your due diligence, and also considering the condition of the property, these homes are not all they’re cracked up to be.

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