The first thing you should look for – or look forward to – is weeks and even months of diligent research. The opportunities in foreclosed homes often fall into the old adage, “If something sounds too good to be true, it usually is.The truth is that for some foreclosed homes, the selling price will be 30% to 40% below market rate. But according to the editor of one real estate investor’s publication, “Most foreclosed homes sell at 5% below market.”
Location
If the foreclosure opportunity you’re looking for is an investment opportunity, then you would be wise to review five years or more of real estate sales history in the area. Have the homes appreciated sufficiently to make your investment risk worthwhile?It does not matter if the property is not in an exclusive neighborhood, but it should be in an economically stable area. This is not an issue of who is moving in and who is moving out, but rather how much is being paid for the homes changing hands.
One factor that has been introduced not too long ago is the cost of homeowner’s insurance and coverage for windstorms if you’re looking in the Southeast.You may find yourself buying a house that you can’t afford to insure in Hurricane Lane, though you may find some real bargains there.You will also find areas where flood insurance has ceased to be available any more.
Physical Condition
Do bear in mind the circumstances of a foreclosure. Most people lose their grip on their homes after struggling to meet mortgage payments for an extended period of time. That probably means the home has received little or no maintenance, and the property you’re inspecting may appear to be in poor shape. If it’s in a quality location however, ignore the condition for the moment, take note of the obvious signs of deterioration, and incorporate rehab costs into your calculations.
Make an analysis of the competition
Keep in mind that just as in any commercial real estate market, you are bidding against professionals. There are people in most areas who make a living from buying foreclosed properties, cleaning them up and putting them right back on the market. Professionals operating in that fashion may not be willing to bid up near market price for the neighborhood, but with any well located property you’re not going to walk away with a “steal.” Take a look at recent foreclosure sales in the area and see if you can find a pattern in the successful bids – how far below market are they?
Clean Title
A thorough check of the building’s title is something that shouldn’t be left out for any foreclosed property.Enquire if someone else has any liens on it apart from the lender who is selling it. If you can, determine if the former owner is embroiled in any lawsuits that could conceivably lead to a challenge of the sale and tying up the property.According to theory, a property is going to market unencumbered once it has reached the foreclosure stage. That means nothing to an attorney who sees opportunity in attempting to delay disbursement of the former owner’s principal asset. Delay is the operative word here; if you’re going to invest in a property you need to be able to put it to work for you with dispatch.
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