What to Know Before Purchasing a Foreclosed Properties
Foreclosed properties can be an attractive option when you’re looking to invest in real estate. They are usually great bargains. Foreclosed properties usually sell for much less than similar properties on the open market.
That said, there are often hidden costs that you may not see at first. With foreclosed properties, extensive repairs are often necessary. The costs associated with these repairs may actually eliminate the discounted price that made you pull the trigger in the first place.
Also, many people who buy foreclosed properties work exclusively in the real estate industry, and as an amateur, you’ll have to do your homework if you want to compete with the pros.
All in all, foreclosures are a little trickier than you’d think. We’ll give you a few tips to get you started on the right foot.
Fewer people are having their properties foreclosed, which is a good thing for Americans in general—but not good if you’re looking to find the ideal investment property. Since 2010, the number of foreclosures dropped by 62%. Back then, there were 2.87 million properties being foreclosed upon, compared with 1.08 million today.
Foreclosures are sold in two ways. If an owner fails to make their mortgage payment, lenders will take it over and auction it to the highest bidder. Otherwise, the bank takes it over and entrusts real estate agents to put it on the market. If you are not practiced in buying foreclosures, a real estate agent is the better way to go. The properties are sold the same as any other.
Auctions are Rough
The general clientele at foreclosure auctions are real estate investors, who may have more cash to throw around than you do. Speaking of cash—that’s how foreclosures are often purchased. The money is due up front for the property, so come prepared if this is the way you want to start invest
Another notable thing about auctions is that you do not get to tour the property before purchasing. You may get some photos of the interior, but a deep inspection will simply not be possible. If you are comfortable purchasing a property without seeing the inside, or knowing the full extent of repairs, then proceed with an auction.
With bank-owned foreclosures, you will have a much easier time in the buying process. Like with any property on the market, you make an offer to the real estate agent. Once presented to the bank, they will either accept your offer or give you a counteroffer. Buying a bank-owned property, can still result in big savings. On average, these go for 38% less than comparable properties on the market.
If you do go this route, you’ll also be able to do a property inspection prior to buying, and you should absolutely not skip this step. You want to have a good idea of what maintenance your new property will require before it is livable.
New Vistas Corporation: Property Management & Brokerage Services
When it comes down to it, foreclosures are a less certain terrain than the traditional housing market. If you are willing to put in the work and take a bit more a risk, though, you may be able to find a wonderful new property at a discount price. No matter how you decide to purchase your next property, New Vistas Corporation is here to support you with the best property asset management, construction facilitation, real estate brokerage services in New York, New Jersey, Pennsylvania, and Delaware. Visit our homepage to learn more about our services.