Foreclosures are often the investors’ go-to’s when they’re seeking a bargain-priced home or wanting to flip a house. And while they’re a solid option, foreclosed homes are very different from traditional resale homes. Let’s take a look at some of the important factors to consider when buying a foreclosed home.
The Dangers of Foreclosed Homes
While foreclosed homes can save you money, they come with baggage. Most foreclosures were not cared for properly and will require some work before becoming livable or sellable. This is common with vacant and abandoned homes, which makes up almost all foreclosed homes since the pandemic began.
Foreclosures are sold “as-is,” meaning that the owner of the property will not perform any repairs on the property. Another challenge could be the legality tied up into the property. Sometimes foreclosure properties have liens or judgments filed against them. This is a claim for the home due to unpaid taxes, repair bills, and more. When that’s the case, you’ll need to pay these off before buying the house.
How To Get A Good Deal
If you find a foreclosure property that catches your eye, here’s what you need to do next.
1. Get Pre-Approved for a Mortgage
Unless you have an all-cash offer for the seller, getting pre-approved is a crucial first step. All cash offers are appealing because they usually mean a quick close.
A loan pre-approval letter shows the seller you’re qualified, prepared, and are a safe bet to follow through on the deal. As your real estate agent, I have a list of reputable lenders, and I’m happy to share that information with you.
2. Research
You’ll need to research the home and the area. You can investigate the house through property records found at the county clerk’s office, and you may be able to avoid paying for liens placed against the property. You’ll also want to look for any improvements to the home, its ownership and sales history, and its assessed value with the county.
3. Get a Home Inspection
A home inspection will help you better understand the property and its flaws. As your real estate agent, I can also help with evaluating the property.
Once you have more information about the property, work backward to come up with an offer price. The rule of thumb for home flippers is purchase and repair costs should not exceed 70% of the home’s expected after-repair value.
This is just the tip of the iceberg, and there are many more important factors to consider when purchasing a foreclosed home. Contact us today, and we’ll happily guide you through the process: (512) 721-1094 or dbrown@talkpropertymanagement.com.
