Tips for Buying a Foreclosed Home

2 Jun

Tips for Buying a Foreclosed Home

Foreclosure occurs when a home owner fails to make payments on their mortgage, the lender considers them in default, and the property is sold by auction. At these auctions, you can purchase homes for less than their market value, thus making them a very good investment opportunity.

However, buying foreclosed properties can be complicated and risky compared to buying a property that does not have the financial baggage. In some instances, however, you can’t see the property first and therefore don’t know how many work and many may be required to restore the property to good shape.  Many real estate investors know how to make a nice profit from them, however, and you can too.

If you are planning on buying a foreclosed property, here are five tips to keep in mind:

  1. Check the physical state of the house. Most foreclosed homes have a lot of unaddressed maintenance issues, and some may contain some pretty serious damage. Calculate as best as you can how much money and time will be required to address repairs and maintenance to determine if you have the budget and if it’s a worthwhile investment.  For example, you may find a home that has quite a few structural issues, but if it is located in a high-demand area, you know you will be guaranteed to recoup your costs.
  2. Buy title insurance ahead of time. Title insurance will protect you from any unforeseen liens against the property, so you do not have to be held financially responsible for activities that happened before you owned the property.
  3. Get to know the neighbourhood before purchasing. A home in a bad neighborhood is a lot harder to resell, no matter how nicely you fix it up. If it is questionable whether or not you will be able to make a profit when selling the house, it may not be a good investment.
  4. Know your limit. Most real estate investors get excited by the idea of earning a lot of money with investment properties, and as a result, they get in over their head. They get carried away and don’t take the necessary precautions to minimize their risks. Make sure you take the time to calculate things properly and double-check your budget before purchasing anything.
  5. Hire a professional real estate agent. It is advisable that you seek professional real estate guidance. Lenders always want to proceed with foreclosures as soon as possible in order to prevent losing any more money, and a real estate agent knows how to make things happen quickly and properly the first time around.

Jennifer Fields
Oklahoma City & Edmond Real Estate Agent
405.330.0031

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