In the pursuit of locating an excellent bargain, lots of Timbergrove investors look into buying foreclosure properties. But the truth is that the process of purchasing a foreclosure can be a bit tricky to navigate on the off chance you’ve never done it before. All the same, with certain tips on how to successfully buy a foreclosure property – and how to discover warning signs directing you to walk away from a deal – you can add foreclosure properties to your next investment property search.
It’s essential to note the difference between a traditional listing and a foreclosure. Though traditional listings are typically homeowners or investors selling individual properties, foreclosures are properties that have been reclaimed by the lender or bank for nonpayment of the mortgage. When a property has been foreclosed on, the lender would usually strive to recoup as much of the outstanding mortgage as they can by selling the property, often at a price below market value.
If you are ready to go and start your search for foreclosed properties, you might need to hire a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market and can be a helpful source of direction and useful information. Watch out for agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These specifications point out that the agent has done and completed additional training in foreclosure property deals.
In addition to the right real estate agent, you must also ensure that you have financing lined up and ready to go. Foreclosure deals can move very quickly, so you need to be prepared to do so, too. The most successful foreclosure buyers provide preapproval letters and other documents to the bank or lender in an attempt to demonstrate their ability to close the deal quickly. The last thing a bank likes is to sit on a valuable property for longer than necessary. But they do still want to get as much as possible for it. It is a unique balance and a reason why buying foreclosures can be a far more nuanced process than traditional home sales.
Despite the fact that things are rapidly advancing, don’t forget to do your due diligence. Run the numbers and locate comparable properties in the area before making any offers. In very competitive markets, you may have to offer a bit more than the initial asking price to appeal to the bank or lender. If that is so, then this higher price should be included in your calculations.
During this whole process, pay close attention to potential red flags. Take one example, it is essential to inspect carefully for hidden liens on the property. It is common sense to believe that if the previous owners stopped paying their mortgage, they probably may have failed to pay some or all of their other debts. Unpaid property taxes and other debts can result in liens against the property that will need to be paid before the title can be transferred into your name. Another big red flag is serious repair issues or missing things.
Although a small number of cosmetic issues are prevalent in a foreclosed property, some people probably have seriously neglected or even intentionally damaged the property before they are forced out by the foreclosure. Angry owners and tenants have been known to strip the house of anything of value, including copper pipes, fixtures, doorknobs, and even cabinets. Conditional on how big the required renovation work is, you may discover that what sounds like an attractive deal would, on the contrary, turn out to cost a large sum of money to renovate.
Acquiring foreclosed properties is a decision each investor will need to make on a case-by-case basis. But, happily, with the right guys on your team and a desire to tackle a few risks, you just might get a fine bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Timbergrove, make sure you have the right team managing your investment property. Speak with someone in the Real Property Management Heritage team; contact us online or call 832-449-5263 today!
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