Foreclosures at first glance can be somewhat intimidating, particularly for first time home buyers or small investors. However, the savings that can be made by purchasing a foreclosed home far outweigh the risks and extra work involved. No matter the condition of the housing market, foreclosed homes can be a very good investment whether you are purchasing it for resale, to rent it or to live in it yourself.
On average, foreclosed homes sell at 5%-10% less than market prices. Lenders who have had the house listed for longer than a month may be willing to waive certain fees or lower the interest rate in order to get to closing. Sometimes even the down payment amount will be lowered. As an investor, these savings can only increase the return rate of your investment in the future.
Repairs and Renovations
Oftentimes potential buyers can be distracted by cosmetic issues within the home. Do not let that be you! Painting, replacing carpet, adding new trim and moldings are all relatively inexpensive repairs that will give the house a more appealing look, and make it more move in ready for your potential buyers or renters. Be careful though, structural issues can be much more costly than cosmetic ones. Roof or foundation repairs can get expensive quickly.
Even if you don’t plan to sell the house immediately or live in it yourself, renting it can be a very good option until you decide what will be best for you. Anytime you purchase a home you should already be looking ahead to the point of selling. Making good choices now will save you time and money in the future. If you expect a good rate of growth in the surrounding neighborhood, then it isn’t a bad idea to rent the home short term, allow the equity to appreciate, and give the neighborhood time to make your home a more appealing purchase in the future. This will increase your return of investment later.
Understanding how foreclosure works will give you bargaining power in the future. Do your research and don’t be afraid to ask questions about the process before you commit yourself to the investment. Look for lenders and brokers that are familiar with the process, and request a complete home inspection by a qualified individual before you get to the closing table. Don’t make your purchase based on price alone. Instead be thinking of the costs of tomorrow in renovations and repairs.
Watch Out For
Keep an eye out for damage. Properties with structural damage can cost you big time. Sometimes when owners get behind on mortgages they may also get behind on maintenance and repairs of the home. Always take this into account.
In some states the original owners have a certain amount of time to get back on track with their payments, and pull the house back away from the closing table. Don’t become too invested or committed to a property until you know for certain that you will be able to close on it.
Lipply Real Estate, serving the entire Tampa Bay area, is not afraid to show and help you buy Tampa Bay foreclosures. Foreclosures are one of the hottest properties right now. Don’t forget you can still find a great deal whether it is a foreclosure or not!