The Benefits Behind Buying Foreclosed Homes
Years back there was a “fad” that caught on where everything that was popular became the “Flavor-of-the-month.” Usually that “flavor” became tasteless after a month, and another one quickly took its place. However one “flavor” that seems to be standing the test of time is the foreclosed homes.
Yet with all its seemingly blue sky and green lights, ostensibly taking you to the Promised Land at the end of the rainbow, many investor foreclosure wannabes were still asking themselves: “wills this end in disaster or a jackpot? To put it in a more simple parlance: “Sometimes you’re the bug; sometimes you’re the windshield.
Like any common sense real estate transaction an investor should know the drawbacks and the benefits of buying a bank-owned, “distressed” property foreclosure. Even knowing that several years ago nearly 2.5 million homes in this country were in foreclosure, risk taker investors eschewed the dark clouds overhead, noticed the drawbridge were still up and the foreclosure sign in huge letters still reading: “Open for business.”
How Much Of A Discount Is Available When Buying A Foreclosure?
Well it has changed a bit from when the real estate fiasco jumped off the rails. Several years ago on average, a foreclosure sale would be discounted for about 30 percent less that a comparable home that was not distressed. Also the median, ready-to-move-in foreclosure was priced at $185,000, while a non-distressed home went for around $268,000. In 2013 the discount still hovers around 26 percent depending on the state.
Who Determines What A Bank-Owned Foreclosure Discount Will Be?
For the most part each individual state has its own rules and regulations on foreclosure, not the government. Ergo, the steps to riches can vary from state-to-state.
Generally Speaking What’s The Cost To Fix-up A Foreclosure?
You should be able to get by spending about 10 percent of the purchase price to complete all renovations then sell, hopefully, for a profit. But unless you’re not a “hammer and nails” guy, all your profits could be eaten up hiring subcontractors to do the “grunt” work.
There are plenty of benefits in buying foreclosed homes; but there are drawbacks as well. Many times an investor will see the dollar signs on a badly ransacked home in a great neighborhood. Yet it could end up costing a fortune to get it ready for sale. A smarter move would have been to buy a foreclosed home in a “middle class” neighborhood, and get two or three friends who know construction to work with you for a share of the profit when the property is sold.
In any event never close the deal on a foreclosed home until you have run an escrow search for liens and any other legal issues that may pop-up. Also, have a thorough home inspection done on the property and especially keep an eye out for roof damage, cracked foundation inside and outside, and electrical conundrums. A cheap foreclosed home sitting vacant in a year should be persona non grata.