So you want to be a real estate investor, why not as it can be incredibly lucrative however let’s start first with the basics. One of the first things a potential buyer needs to understand is exactly what is a foreclosure home. A foreclosure is a property that has been repossessed by a lender because of nonpayment, atypically these lenders i.e. banks then need to sell off these property’s to recoup their losses for many cases substantially less than their true market value. Herein lies the opportunity that any savvy investor cherishes, which is too procure a potentially great home/property at a significantly discounted price. The beauty of all this is that since lenders price their foreclosures for a quick sale to minimize their losses, this applies to starter home to million dollars mansions appealing to all buyers demographics. Couple this with the opportunity for savvy buyers to incorporate some sweat equity in their foreclosure and the return you can see on your investments can be very profitable.
The pros here are very appealing as these opportunities can be found in all 50 states in both strong real estate markets and bad real estate markets nonetheless. II. As for disadvantages to procuring forecloses let’s now look at some pitfalls you will want to avoid to protect your bottom line. First and foremost is the reality that you may have to pay cash. For most all foreclosures there is a built in cadre of investors who pay cash only and buy solely as is so to compete with them you may have to do the same. Many foreclosures are sold at auction to the highest bidder thus if you are not a cash buyer you can basically eliminate yourself from the competition, this is a reality challenge of course for many potential buyers but the reality is this is a near constant so prepare yourself for it always.
The next challenge is to prepare yourself to buy the property entirely “AS IS” this is a another near given in all of these types of transactions. This not only means you will be responsible for any property damage or renovations but also for lien, back taxes, unpaid utilities, and back payments potentially as well. Couple all this with the fact you may not even be able to fully inspect you the property you are seeking to acquire so you will must assume the risk for any and all liabilities you may find within the property, OUCH. Regarding financing foreclosure properties lenders are very strict in allowing this for good reason, thus it will clearly behoove you to form relationships with lenders you can choose implicitly to make this types of transactions happen for you on a moments notice. Last but not least, a foreclosure buyer must factor in the costs of repairs inside and out, thus a relationship with a contractor you can trust will be invaluable to you in this regard so so that now before you buy one of these properties.
Many times these homes have sat vacant for many many months with of course no utilities still on resulting in busted pipes and pest infestation in walls and foundations that can reek absolute havoc on a home over time. Couple this with the fact that the original owners who lost these homes may not been a good house keeper if you will and most probably deferred any and all required maintenance in the property due to their individual finance hardship, count on this as it is a near constant. III. In closing the pros and cons denoted herein are just some of the challenges you will experience and a foreclosure property buyer. It is imperative that you do your research and due diligence before hand so that you can protect yourself from the inevitable pitfalls and challenges you will come across.
In the end with risk comes reward, and the countless number of people who have funded their retirements and made their livelihoods from the acquisition of said properties shows it can very a very lucrative endeavor so good luck and Godspeed to you in your efforts. Always remember however it is location, location, location that ultimately denotes true value and this will make all the difference in your success or failure in the purchase and ultimate sale for a profit of foreclosure properties. Let the buyer beware is a maxim thats should be a forefront of all your purchases.