I did the first six parts of this on my A/R blog. I thought I would drop one here, too… Here are the previous visits to the mailbag:
Part II, When should we start to look?
Part III, New Homes inducements
Part V (A), What should we do to our house?
Part VI, Why didn’t my house sell?
I get asked a lot about foreclosures. A LOT. Seriously. Everyone is thinking that there is money to be made in foreclosures, or killer, super-duper, bona-fide deals. And… there are. But, these are dangerous waters. Navigate carefully.
What it comes down to is that there are some VERY important considerations to keep in mind when looking at foreclosures. These are also true with short sales and pre-foreclosure sales… in fact, almost ANY distressed property is going to have pitfalls.
There are only two tools that can be used to address the pitfalls. Either or both may need to be employed. Money. Time. Anything can be solved by money alone. You can simply hire someone to take care of it. Some things CAN’T be solved with just time, but time can be traded in for money.
- Here is the first thing to remember, Time is NOT free. If you are looking at a house, and it needs paint and other work, even though the money isn’t high (paint is only a couple hundred dollars for a whole house), it WILL take a lot of time if it isn’t hired out. And that is time that you could work or play or stare at the TV… or blog.
So, since we know that no matter what, there will be expenses, and we can be sure that the “seller” won’t want to come out of pocket with a lot of allowances…
- Know that buying a distressed property requires cash AFTER the closing. It might be as cheap as paint and serious cleaning… and filters and septic treatments, etc. Or it might be a roof and fixing foundation damage.
The next thing that needs to be kept in mind is that when people can’t make the house payment, or they are stretched to the absolute limit, maintenance is NOT a priority. We have a euphemism… deferred maintenance. Even in homes that look good at first glance, there will be things that have been let go.
- Next on the list, Inspections are your friend. And don’t think that the inspection is something you should scrimp on. Get a good inspector. Get an inspector that you trust. Ask questions. Understand EXACTLY what the results are, and how they will affect you.
Since everyone is asking me about foreclosures and distressed properties, I know that there is competition for the “best” deals. That’s right. Right here in the middle of a huge Buyer’s Market, there are properties that have competition. Low-ball offers and outrageous demands aren’t making it with the banks in general (even on the properties that suck…) and certainly not on the ones that are actually worth buying.
- Finally, when you find a good deal, be ready to buy it. Just because Katie Couric and Clark Howard are saying that this is the best buyer’s market in the last 40 years, for money making properties, you have to move and move fast.
I love to get question. Email me, and I will answer your questions on my blog, or via email.