Considering Buying a Foreclosed Home? Avoid these Mistakes
Posted July 20, 2014


Foreclosure filings increased significantly as a result of the housing bust that occurred several years back. Although unfortunate for those who lost their homes, purchasing a foreclosure turned into a once in a lifetime opportunity for those who could invest in real estate. Following are some of the pitfalls or costly mistakes that buyers can run into while attempting to purchase foreclosed property.

Buying without an agent. Purchasing foreclosed real estate is more complicated that buying a traditional home. Because of the complexity, it requires a real estate agent that has a background in buying and selling foreclosed homes. Unless the buyer is a real estate expert themselves, it is strongly advised that they use an agent with this type of expertise.

Unfamiliarity with the law. Foreclosures are heavily regulates, and those laws can change significantly from state to state. Because of this, consumers should first review the foreclosure laws in their state then request qualified legal advice from a local real estate attorney.

Thinking short-term instead of long-term. If you are trying to invest in a quick house flip, you will most likely lose money. This is because many foreclosed homes could decline further in value in the months after the sale. One type of investor likely to fare well would be the one with the resources and patience for a long-term real estate investment. The buyer who can afford a fully amortized fixed-rate mortgage would also be likely to do well.

Considering only the selling price. The price that a foreclosure is listed for could be well below what it was valued at in the past. The reason for this would most likely be the amount of maintenance or repairs that would be required to make it livable. A possible buyer should set aside approximately ten percent of its price tag just for repairs. Homes can deteriorate fast.

Searching for foreclosures in too broad an area. The best target market a buyer should concentrate on should be in a specific neighborhood, and using an agent with experience in that area. Let the agent know just what you are looking for in the way of property, bank listings, cost willing to pay and your desire to be alerted when they come on the market. That way you know when your specific wants in a foreclosure becomes available.

Assuming the bank will take any offer. Banks usually outsource their foreclosures to real estate agents. That agent's priority is to get their client a good price and sell the property quickly. A lot of people think that that because the property is bank-owned, that they will let it go at a ridiculously low price. Making this type offer may derail any type of negotiations right away. Make sure you talk through this process with your agent.

Posted By: Michelle Keaton-Barrow
July 20, 2014 06:59 PM




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