Buying Foreclosure Properties
Definition:
“A foreclosure property is a piece of real estate that a mortgage lender sells to pay off a defaulted mortgage loan. Every foreclosure culminates in a public auction where the lender sells the property and anybody can purchase the property. Or you can purchase a foreclosure property from a bank after the bank purchases the property at the auction.”
The real estate market is showing increasing signs of recovering and there are great investment opportunities to be found. Home prices are still relatively stable and interest rates are still very attractive.
However, whether buying for a primary residence or for investment purposes, there are still some basic guidelines to follow when considering buying foreclosure properties.
Below are my 4 Buying Foreclosure Properties Tips
1. Work with a broker.
It does not matter if you are buying a foreclosure for investment or as a primary residence, it is really helpful to have a broker help with the process.
Neighbourhood is one of the most important factors when it comes to buying a home and a broker is worth their weight in gold when it comes to knowing the local real estate market.
2. Do the financial due diligence.
All we need to do is remember the real estate market crash to see why it is important to do a thorough financial due diligence when purchasing a home.
Be realistic about your budget and how much home you can really afford. If the home is an investment purchase, can you make the mortgage payment if you have to carry the mortgage for a few months?
That can happen with investment property so be sure you factor in at least six months of mortgage payments just in case.
Also factor in the cost of any repairs. This is especially true with foreclosure purchases which are often sold ‘as is’ which means they often need repairs.
Verify the condition of the property. Restore and repair costs add up on a total value of a home.
It is always best to purchase foreclosure properties that require minimal repairs, otherwise your profit margin shrinks.
3. Understand that every neighbourhood is local to that neighbourhood.
What this means is that what is selling in one area may not be selling just down the road, so you need to do your homework and check comparable homes in the area to know whether or not what you are buying is a good investment.
Get a proper assessment on the home you are considering purchasing.
Buying foreclosure properties will generally be thirty to forty percent discounted, so if a foreclosure home does not need major repairs and you can get it for a price that is well below the market value of similar homes in the same area, then you are probably making a good investment.
4. Try and find foreclosures that are bank and creditor owned.
These properties are where you can most likely get the best deal because banks are not in the business of owning property so want to sell these types of properties and will often do so at a much discounted price.
Investing in foreclosure properties can be a very smart move, especially in the current real estate market.
With housing prices still relatively stable and interest rates still very attractive, there are many good opportunities for investment available.
When considering buying foreclosure properties, it pays to research the property and to do the financial due diligence in order to verify the quality of the property and financing.