9 Tips for Buying a Foreclosure

 

Buying a foreclosed property can be so exciting, especially if you get an awesome deal in an awesome neighborhood.  They make perfect homes or investments.  Before taking the big plunge check out my tips to buying a foreclosed property.

1. Budget carefully. Don't let the small price tag fool you.

Do a gut check and ask yourself the following questions: Do you have the money for the extensive repairs these houses often need? "Do you have a crew. If you plan to rehab and then rent, can you afford the house if you don't find a tenant? If you do your homework, there's little risk

2. See the house for yourself. Pictures can be deceiving and will rarely expose the homes flaws.

3. Look at the neighborhood. Your homework should include evaluating the neighborhood.

You may not be able to recoup the cost of the repairs if the value of the house is depressed by widespread foreclosures or high crime in the area.  I always suggest weekend and w.eek night drive throughs to get a real feel of the neighborhood when everyone is home from work and school

4. How long has the house been empty? The longer the vacancy the more damage there is, in most cases.

5. Was it winterized? 

Don't turn on the utilities until you know the condition of the pipes. If the pipes cracked during a cold spell, water will leak into the walls, and mold could take hold when you turn the water back on.

6. Look at the landscaping.

If the house has been neglected, untrimmed trees, vines and bushes contribute to the deterioration of the house. Vines can crawl into the windows, and tree seedlings send roots down into the foundation. It doesn't take very big trees to mess up pavers, and dead branches crash into the house.

7. Get an inspection. 

Banks generally require a home inspection when lending money for a mortgage. But even if you are paying completely out of pocket for an ultra-cheap find, all the pros say it's crucial to get an up-to-date inspection. 

8. Consider a HUD house. 

The Department of Housing and Urban Development is currently holding approximately 39,000 houses whose previous owners held mortgages insured by the federal government. HUD houses go to market about six months after foreclosure. Local governments get the first option to buy. After that, buyers who pledge to live in the house have the first opportunity to offer a bid. If the house is still on the market after a period of about 10 days, the listing is opened to investors. Owner occupants end up with about half of HUD's properties, according to HUD officials.

If HUD appreciates the value of a good inspector, inspectors likewise say HUD houses are better protected. The feds often take the steps to winterize the houses. They put anti-freeze in the traps, and drain the pipes. When HUD's involved it's a little bit better.

9. Don't expect to profit from a quick sale.

Investors who buy intending to do as little as possible to a house, hoping to resell for a profit when the market turns around, may find little profit and a lot of headache. Some cities are cracking down on neglectful property owners, charging penalties that increase over time, and unmaintained homes lose value quickly. But real estate pros and housing officials report that, overall, investors are a welcome and all-too-scarce resource, and most are fixing up the houses they buy for rent or resell. What's more, investors and new owner-occupants might get the satisfaction of helping to turn a hard-hit neighborhood around.

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