Quite naturally, anyone with a bit of cash to spare these days is going to be attracted to some of the big bargains on offer when they look around at all of the foreclosures in their area. But while there’s definitely potential to make money with this kind of investment, a foreclosure transaction can be quite a tricky hurdle for those who are new to this game.
Those who are new to buying foreclosures need to pay attention – there are a number of things to look out for before jumping in headfirst and snatching up the first bargain-basement home they see.
First of all, above all else, make sure that the deal really is good value for money. Before going and making an offer on a home, buyers should carefully review the value of a home by checking comparable sales price data in the local area, says Daren Blomquist of RealtyTrac. Other factors, such as the number of schools nearby and the kind of amenities in the area will also have an impact on a property’s value.
According to Blomquist, “You want to be careful if every house is in foreclosure. When you purchase a property in this market, the value will probably go down before it goes up. If it’s the only property in a market, you can probably get a good deal.”
Alexis McGree of ForeclosureS.com adds that buyers should always be realistic – the most they can expect is a discount of around 10% to 20% on any bank-owned property.
It’s also imperative that buyers check the condition of any home they are interested in. Because foreclosures are always sold as-is, it’s necessary to have a home inspection done before the sale to ascertain what the repair costs will be, if any. Nobody wants any nasty surprises when they buy a foreclosed home, and should any problems be found during the inspection, buyers could use this to justify a discount on the sales price.
Buyers can also look for special financing to help them with the deal. There are a number of options available from the Department of Housing and Urban Development, such as the Federal Housing Administration Section 203(k) program. According to Blomquist, buyers can get more money to fix up a foreclosed property when they get an FHA loan. And in order to secure one of these loans, which are fully insured by the HUD, all buyers need to stump up is 3.5% of the property’s purchase price as a down payment.
Before we go, one final tip. Always, always run a title search. Experts agree that its essential to do so in order to find out if any property taxes are owed on the home, or if it has any liens from other lenders.
Source: Fox Business