Tips for Buying Foreclosure Properties
Due to the recent surge in mortgage defaults and foreclosed properties, opportunities exist for individuals and families to purchase homes at a mere fraction of the market value. However, caution must be exercised when one looks at buying foreclosure properties. The condition of the property may well be such that the cost of repairs could prove higher than the value of the property after the repairs are made. The following are just a few tips for buying foreclosure properties.
First, create a carefully planned budget that includes the cost of any repairs or renovations that may need to be made in order to make the property livable. Just because the purchase price is extremely low does not mean that the total price for the property will even be reasonable.
The second thing to remember is that one must see the property for himself or have a trusted agent view the property before the decision to purchase is made. Many investors have waded into the foreclosure market with dreams of huge profits only to find that the properties they bought sight unseen were nowhere near worth the price paid, let alone the value promised. Some have even purchased foreclosure properties only to find that what they bought was a vacant lot with no home on it.
The neighborhood the property occupies will have a significant effect on the final value. High crime rates or an excessive number of foreclosures in the area will depress property values and make it difficult at best to recoup one's investment. It is important to see the neighborhood at all hours of the day and night before making a decision about the attractiveness of the neighborhood. Some properties that looked great in the daylight could prove untenable after dark due to excessive noise or crime.
Another point to examine when one considers buying foreclosure property is the landscaping. If a lawn is unkept, the likelihood that tree seedlings may have spread roots into an under the foundation or that creeping vines may have damaged the structure increases drastically. When a bank holds a property in foreclosure awaiting sale, they should hire a property manager to take care of the landscaping around the property to ensure that it maintains its value.
It is also important to consider how long the property has set empty. In areas where winters can be harsh, if the pipes are not drained, there is a very high likelihood that damage will have occurred that may not be noticed until the water is turned on. This can lead to mold in the walls and other problems. Additionally, sewage gases can build up in pipe traps and insects can creep into the structure through the pipes.
The final point of caution that should be taken into account when buying foreclosure properties is the need to have a certified inspector examine the property from top to bottom. Even if the property has been inspected many times in the past, each of these reports amounts to a simple snapshot in time. The only way to gain a true idea of the condition of the property right now is to be willing to pay to have an inspection performed prior to purchase.
If one follows each of these tips and exercises care, a foreclosed property can prove to be one of the least expensive ways to become a homeowner or one of the best ways to acquire investment property. Failure to do so can leave a person trapped in a money pit that can be nearly impossible to unload.