Foreclosure sign
Over the last few years the economy has wreaked havoc on the real estate market and appraisers such as Abbe Edelman have witnessed a record number of properties undergoing foreclosure. Sometimes potential buyers look at properties in the foreclosure process and think it is a great purchasing opportunity. However, there can be some risks associated with purchasing foreclosed properties. There can be several steps associated with a foreclosure and each step in the process can pose certain risks as well as benefits. There are several factors which should be considered in order to determine if you are a good candidate for purchasing foreclosed properties.
Prior Homeownership is Beneficial
Before you step up to begin the process of purchasing property that has been foreclosed, take some time to consider the proposition. Buying your very first home can bring lots of challenges but a foreclosed home can have many more difficulties such as being in disrepair or various types of legal concerns that can make the process even more complicated. If you have already owned a home it can help bring a greater level of understanding about what owning a home can cost you – this is beyond the monthly payment on the mortgage. Having experience with homeownership prior to pursuing foreclosed properties can help in developing relationships with key professionals. Having a professional relationship with loan officers, real estate professionals and a property appraiser can help when you are considering more purchases.
Investment Property or Primary Residence
Sometimes homeowners already have a primary residence and desire to purchase a “fixer-upper” as an investment. It can be enticing to purchase foreclosed properties but it can become very complicated. Inspect the property carefully before committing to a purchase since the repairs can be more expensive and end up being a financial burden. Also remember that prices do not always bounce back as soon as we would like them to therefore you must be willing to just use it as a rental for a long time before it can be sold for a profit.
It is very possible to be hit with lots of unexpected expenses when you purchase a foreclosed property. Take the time to research the property of interest. Sometimes property that has been foreclosed on has been sitting for long periods of time. This can mean that squatters, vandals or thieves have targeted the property. A common occurrence is that thieves steal any copper wiring or piping that is available. Sadly, some homeowners trash the property when they are forced to leave. These can be some surprise expenses if the purchaser is not prepared to handle it financially.
The lender should inform you if there are any liens, judgments or attachments that will need to be dealt with prior to sealing the deal. It is also an indication of a troubled economy when there are numerous properties undergoing the foreclosure process. Make certain that your finances can handle any of these types of situations before proceeding with the purchase.
Developing Professional Relationships
There are several professional relationships that can be beneficial when you are purchasing property that has been foreclosed. It can be important to have an established relationship with investors, an attorney and a trusted real estate agent. These will also know how to contact a reputable property appraiser, a general contractor and a home inspector all of which can be very beneficial in the process. Having a team of experienced professionals on hand can help ensure that you can get a good deal as well as being able to avoid getting in a deal that is unprofitable.
