When looking for good deals, a number of Lakeview investors consider buying foreclosure properties. Although purchasing a foreclosure can be a bit tricky to navigate, it’s not impossible. All you need is a bit of experience to guide you. 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 – 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. 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 can give you insight that will be helpful to you in making your future decisions. 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.
Let’s say that you’ve found the right real estate agent for you. What’s next? Get your financing lined up and ready to go! 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. Banks won’t hold on to a valuable property longer than they should have to. They will want, however, to sell it for as much 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 this holds true, then this higher price should be included in your calculations.
Through the processing, 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. 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.
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. 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. 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 Lakeview, make sure you have the right team managing your investment property. Don’t hesitate to contact us online or give us a ring at 773-904-7700 to know more about what Real Property Management Chicago Edge can do for you.
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