A lot of Davie investors are considering buying foreclosure properties due to the fact that they can often be a good deal! The method of purchasing a foreclosure, however, can be a bit tricky to navigate, primarily if it’s your first time to do so. Follow along to get to know how you can successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal –helping you add foreclosure properties to your next investment property search.
It’s important to note the difference between a traditional listing and a foreclosure. While traditional listings are typically homeowners or investors selling individual properties, foreclosures are properties that have been reclaimed by the lender or bank for nonpayment of the mortgage. Often selling at a price below market value, lenders will mostly try to recoup as much of the outstanding mortgage as they can by putting the foreclosed property up for sale.
If you feel like you’re ready to commit to searching for foreclosed properties, an important next step would be to hire a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market. So, make sure to heed their counsel before rushing to any decision. Look for agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These designations mean that the agent has completed additional training in foreclosure property deals.
Remember that you should have your financing lined up and ready to go before you move forward with any decision with the right real estate agent. Foreclosure deals can move very quickly, so be ready to transact if and when necessary. The most successful foreclosure buyers provide preapproval letters and other documents to the bank or lender in an attempt to demonstrate their ability to close the deal quickly. Valuable property is not something a bank would want to keep in their possession for a long period of time. Nonetheless, they will do what they have to in order to gain as much from it as possible. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
However swift the deals may be, don’t forget to do your due diligence. Run your numbers and locate comparable properties in the area before making any offers. In very competitive markets, you might need to offer a bit more than the initial asking price to appeal to the bank or lender. Therefore, this higher price should be included in your calculations.
Throughout the entire course of the transaction, pay close attention to potential red flags. In line with this, it would be a good idea to check for hidden liens on the property. This is one example of a detail you should know before making any commitments to the other party. Common sense dictates that if the previous owners stopped paying their mortgage, it’s possible that they failed to pay some or all of their other debts. Unpaid property taxes and other debts can result in liens against the property that will need to be paid before the title can be transferred into your name. Another big red flag is serious repair issues or missing things.
Cosmetic issues are not unusual in a foreclosed property, but others may have seriously neglected or even intentionally damaged the property before they are forced out by a foreclosure. Angry owners and tenants have been known to strip the house of anything of value, including copper pipes, fixtures, doorknobs, and even cabinets. Be thorough when doing the inspection, since what might seem like a good deal might turn out to be a big costly repair waiting to happen.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. With a willingness to take risks and a few people who are willing to help you, you can definitely find a bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Davie, make sure you have the right team managing your investment property. To know more about what Real Property Management Asset Solutions can do for you, please contact us online or give us a ring at 954-889-5627.
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