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TIPS ON INVESTING IN FORECLOSURES FOR FIRST TIMERS

Friday, August 26, 2022   /   by Laura Larson

TIPS ON INVESTING IN FORECLOSURES FOR FIRST TIMERS

According to real estate data, 1.36 million homes were under foreclosure in 2013. Investing in foreclosures can make sense if you're the entrepreneurial sort who's constantly looking to find a deal.

Six considerations to make when investing in foreclosures
1. Do your homework
You'll have a lot to fix if you acquire a foreclosed property that is infested with insects, structural issues or needs urgent repair work. If you lack experience with DIY home renovation, this could end up being an expensive project and a time sucker. Before the purchase, get statements on the necessary work to ensure you actually have the funds needed to sell or rent the property.

2. Consider the costs
Expected benefits can be offset by local fees, owner protection, contract installments, and maintenance. This is especially true if you have to wait for a buyer or renter and have sat on the property for a while. Depending on the market, it can take weeks, months, or even years before you start making money.

3. The importance of a clean title
If the house you purchase has title issues, you probably won't be able to auction it off without incurring significant debts against the property. Connect with a real estate attorney or a title agency to ensure the title is error-free. Although there is a cost involved, it is unquestionably the way to go.

4. Research state laws
State-specific foreclosure laws vary, so do your research to make sure you are familiar with the principles and regulations of this type of purchase. For further information, visit the website of your state's attorney general.

5. Investing in REOs
"REO" stands for "real estate owned," and refers to a home owned by a bank. While a foreclosure sale should be conducted before the property is returned to bank ownership. Most banks and financial institutions don't manage real estate, so you might be able to negotiate a lower selling price, so the bank can recoup some of their unique investment.

6. Get a Home Inspection
Always invest in a professional home evaluation before purchasing a foreclosure. A skilled inspector can find problems invisible to the naked eye with the plumbing, electrical, or structure.

Bottom Line
Foreclosure investment is not for you if you are not willing to put in the work and effort. That doesn't mean you should avoid it, just be aware of what you're getting into before you start. Make sure you have the skills, knowledge, and the willingness to be vulnerable as the real estate market can be unpredictable. If you have questions about investing in foreclosures of REOs contact Laura Larson for a free consultation.