Good deals await Carrollton investors when they consider buying foreclosure properties. But, the procedure of purchasing a foreclosure can be a bit tricky to navigate, especially if you haven’t done it before. We do have, however, a few insights into how to successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal –that way, 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. The lender will attempt to recoup as much of the outstanding mortgage as they can by selling the property, often at a price below market value. This happens once the property has been foreclosed on.
When you’re ready to initiate a search for foreclosed properties, begin 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. It would be wise to have one at your side when considering the different investments made available to you. 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 a good step towards the right direction; but, in order for you to move forward, first make sure that you have your financing lined up and ready to go. Make sure you act fast and wise because foreclosure deals can move very quickly. 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 want to dispose of valuable property as soon as possible. Nonetheless, they will do what they have to in order to gain as much from it as possible. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Yes, transactions may happen fast, but 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. If so, then this higher price should be included in your calculations.
Over the proceedings, pay close attention to potential red flags. As an example, make sure you don’t fall into the trap of hidden liens on the property. Since the previous owners stopped paying their mortgage, it wouldn’t be far-fetched to think that they might have failed to pay some or all of their other debts. 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.
Although a few cosmetic issues are to be expected in a foreclosed property, some 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. Don’t rush into a hasty decision, all because you found a “good” deal. This deal might turn out to cost you more in repairs than in actual investment.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. However, with a team of competent property investment managers, it’s easier to find 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 Carrollton, make sure you have the right team managing your investment property. If you are interested in learning more about Real Property Management Legend or have additional questions, please contact us online or by phone at 214-227-2404 today.
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