A foreclosure is a piece or property being sold off by a lender in order to pay off a mortgage loan that has gone into default. When a property is foreclosed on there is an auction allowing anyone to purchase the property. You can also purchase directly from the bank. You can get some incredible deals on investment properties when you are buying foreclosure properties but they can be complicated. Here are some tips to follow.
Work with an Agent
Whether you plan on using the property as your primary residence or you plan on flipping it an agent can help. The realtor can help tremendously when it comes to the local market. Determining the value of the property and whether it is a sound investment.
Check the Financials
While you can get some great deals from a foreclosure you still need to stick to a budget. If you are buying as an investment or rental property can you afford to carry the mortgage while repairs are made or until you can feasibly get tenants in there? You still need to get an inspection of the property and determine the repair costs. Foreclosure properties are generally sold “as is” so repairs are almost a given.
Check the Comps
One of the ways to determine whether or not the property is a good deal is to check what other properties in the neighborhood are selling for. You will also need to have a realistic assessment done on the home you are considering. Typically there is a deep discount on foreclosed homes but to determine if it really is a good investment you need to factor in repair costs and look at the market value.
Find Bank Owned Foreclosures
Banks and other lending institutions aren’t landlords and they don’t want to own property their only desire is to get them off their books. They will generally do so at low price just to be rid of them. You want a bank owned foreclosure rather than one going up for auction there is less competition and you can generally get a better price.
Foreclosures can be a very smart investment, the housing market right now is stable and interest rates are still good. You still need to research the property thoroughly before you sign on the dotted line. Even buying a foreclosure can turn into a very bad deal if you’re not careful.