Learning how to buy foreclosures with the utmost care is essential in order to avoid unpleasant surprises later. Purchasing foreclosed properties can be a very good investment for the small investor or for the family searching for an opportunity.
However, there are some caveats that everyone should look for. Perhaps the investor should look at this article not as how to buy foreclosures but instead how not to buy foreclosed properties.
Searching for foreclosed properties
Looking for property is, of course, the first step but there are some things you should avoid.
- Do not rule out properties that exceed the size requirement you have.
- Older homes are notorious, for example, for having a plethora of rooms, but they are also notorious for having small-sized rooms.
- If you are seeking an older home, either as an investment or as residence, finding a home that boasts seven bedrooms can actually be a find that will cost you much less to rehab into a spacious three bedroom home.
- Do not limit your search to just one neighborhood either. Regardless of what kind of neighborhood you are searching in, there is frequently an equal neighborhood or neighborhoods nearby that have all the amenities you are searching for. Thus, keep an open mind to different neighborhoods.
As you can see, learning how to buy foreclosures involves very practical considerations like spatial and area considerations as discussed below.
Buying foreclosure properties and appraising the neighborhood
Do not fear driving by various homes, checking out not only the particular house you are considering, but also the neighborhood, and the neighbors. If you are going to reside in the house, it is important to verify that at least some of the neighboring homes are occupied.
Nothing is worse than being the one occupied home in blocks of foreclosed properties. First, safety is an issue, and there have even been developers who have walked away from a development when it’s only a third completed. That means that the community pool, and other planned neighborhood services and amenities may not be constructed as advertised.
In our next section on how to buy foreclosures we will see how scrutinizing a foreclosed home is of vital importance.
Inspecting the property before buying foreclosure homes
Buying a foreclosure home is full of pitfalls; however, a bit of self-protection is in order here. Unless you are a licensed general contractor, bring someone who is highly knowledgeable about construction with you.
Yes, you have the foresight to imagine the place cleaned up, the bright orange paint gone from the kid’s bedroom, and the drapes carefully hung instead of the king size sheets with tears in them, but looking at water damage in the bathroom and assessing the cost of the work and what’s involved may be beyond you. Accepting your own limitations is important here.
People who are currently residing in a foreclosure-eminent home have often let go of many home repairs due to lack of resources. The smart buyer will also bring a plumber with them. If you are going to invest in foreclosure properties, it will pay you to keep such people on a retainer, or at least work out a deal with them that they are guaranteed employment on foreclosed properties you purchase.