13
Nov
12

10 Tips for Purchasing a Foreclosed Home

  1. Budget Carefully. Beware of letting a small price tag lure you into making a quick deal. Just because a foreclosed home is going for so cheap, doesn’t mean that its purchase won’t come with a lot of additional (sometimes hidden) expenses, such as the cost of necessary repairs or upgrades to the home. So, be sure when you’re looking at the cost, you’re looking at the big picture.
  2. Don’t Buy Sight Unseen. This should be an obvious one, but there have been occasions where buyers have placed bids or even purchased homes based on photos because of pressure from real estate agents or elsewhere. Be insistent on visiting the home before making any kind of commitments to purchasing the home, particularly given that there are scam artists out there just waiting for the naive buyers that might be willing to buy something sight unseen and then become victimized by such naivety. While it’s a good practice to always be willing to take the time to see something before you buy it, this is a house we’re talking about. No doubt at all, you should go see the home.
  3. Check out the Neighborhood. Your neighbors and the surrounding neighborhood is equally as important as seeing the house for yourself. Whether you’re looking to purchase the home to live in or to rent out or even sell, the surrounding neighborhood has to be a place you feel comfortable and safe to come home to. And if you’re not planning on living in the home, then the same goes for either tenants or prospective buyers.
  4. Check Length of Vacancy. Homes that have been vacant for a very long time may be neglected and require repairs to damages incurred due to lack of use or maintenance, including plumbing and bug infestation.
  5. Is the Home Winterized? Until you know the condition of the pipes in the house, you should not turn on the utilities. If the pipes have cracked during the cold winter months, it may create water leaks throughout the walls and cause mold to build up, which will create additional repairs and costs to you as the owner.
  6. Check the Landscaping. If the house has been neglected, untrimmed landscaping left to grow about the home may also create potential problems with roots growing into the foundation of the home and vines along the home.
  7. Contract Private Inspection. As mentioned with a lot of the above issues, there may be problems with the home that may require additional expense to repair or replace. It is best to hire independent professionals to come into the home and do an inspection. These professionals are experts at spotting problems with a building structure that the general layman may not be able to. With his or her professional opinion in place, you will be better informed when deciding to purchase the foreclosed home.
  8. Consider a HUD House. The Department of Housing and Urban Development has homes whose previous owners held mortgages insured by the federal government. These homes go to the market about 6 months after the foreclosure and the local government gets the first option to buy. After that, buyers who agree to live in the home have the first opportunity to offer a bid. If the house is still on the market after a period of about 10 days, the listing is then opened to investors. HUD updates its homes regularly, so you will know the fair price of the property and it also offers a “property condition report”.
  9. Be Patient. Don’t expect a profit from a quick sale. Investors who by intending to do as little as possible to a house to then turn around and resell the home for a profit when the market turns around may find little profit and a lot of headaches—especially those just getting into the house “flipping” business. Some cities are even cracking down on neglected homes and fining its owners.
  10. Buy Title Insurance. Last, but certainly not least, this final tip when looking to purchase a foreclosed home and that’s to buy title insurance. Title insurance policies set up to protect the buyer, not just the mortgage company, help protect buyers from the expense of having to defend title to the home should a later claim against the property come up.
Thank you to Kristina Schneider of Expert Title for these great tips!
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Jennifer Ferri, Owner

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