A lot of Yorktown investors are considering buying foreclosure properties due to the fact that they can often be a good deal! Be warned, though, that the proceedings of purchasing a foreclosure can be a bit tricky to navigate, more so when it’s your first time. Don’t be discouraged. Keep reading for tips on how to successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal – so, you can 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. After a property has been foreclosed on, the lender usually tries to recoup as much of the outstanding mortgage as they can through the selling of the property, often at a price below market value.
Hiring a real estate agent who specializes in foreclosures would be your next big step after you begin your search for foreclosed properties. These real estate professionals have an in-depth knowledge of the process and the local market, and they will be able to help you navigate your way around the market. 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 having everything lined up and ready to go is wise. 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. But, as it is, they will hold on to it longer, if they think it will bring in more revenue. 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. In that case, this higher price should be included in your calculations.
Throughout the procedure, pay close attention to potential red flags. A good illustration would be hidden liens on the property. Make sure that this kind of information is disclosed at the very start of the deal. It’s not an empty presumption to believe that the previous owners failed to pay some or all of their other debts, especially when they stopped paying their mortgage. 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.
It is to be assumed that a foreclosed property will have some cosmetic issues. However, there are tenants that 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. You can dive into deals unafraid if you have people who are willing to dive in with you. Find a good team of property investment managers who will find you 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 Yorktown, make sure you have the right team managing your investment property. Feel free to contact us online or by phone at 757-395-4274. Our team at Real Property Management Dominion will be glad to answer any of your questions.
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