When looking for good deals, a number of Churchill investors consider buying foreclosure properties. The method of purchasing a foreclosure, however, can be a bit tricky to navigate, primarily if it’s your first time to do so. Well, we have a few points so share about 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. Usually, after a property has been foreclosed on, a lender will recoup as much of the outstanding mortgage as they can by selling the property, often at a price below market value.
Ready to begin your search for foreclosed properties? Start by hiring a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market and they can give you tips and advice regarding investments in foreclosed properties. 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.
Getting the right real estate agent is but the first step; the next one would be to have your financing lined up and ready to go. 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. Banks won’t hold on to a valuable property longer than they should have to. Nonetheless, they still want to profit off of it as much as they can. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Regardless of how swift the dealings 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. Hence, this higher price should be included in your calculations.
Through the processing, pay close attention to potential red flags. Case in point: hidden liens on the property. This is not something you want to find hidden under a deal. It’s not a foolish assumption to think that the previous owners failed to pay some or all of their other debts since 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’s not unusual for a foreclosed property to have cosmetic issues but, there are those 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. Again, before making any commitments, be thorough in your due diligence. You don’t want to buy a property for a great deal, only to find out later that it cost you more to have it repaired.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. Now that you’re ready to take risks in investment, make sure you team up with people who will help you accomplish the goal of finding 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 Churchill, make sure you have the right team managing your investment property. To know more about what Real Property Management Bozeman can do for you, please contact us online or give us a ring at 406-586-2226.
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