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Should You Buy A Foreclosure?

Most people fall into two categories when it comes to purchasing a foreclosure. They either believe a foreclosure is a really great deal, where there is a good amount of money to be made, or that it is a terrible deal, where the new homeowner is bound to lose a fair amount of money. What keeps the deal swinging in either direction? Research. If you want to find a good deal in purchasing a foreclosure, you are going to have to put major time and effort into looking for the gem amidst the rocks. Should you buy a foreclosure? Yes, if you are willing to put in the necessary time. No, if you are not.

The key aspects of research that are needed in finding a great foreclosure deal include:

  1. Evaluating the neighborhood. The location of a home is an important factor when it comes to the value of the property and quality of life for the homebuyer. In evaluating the neighborhood, you will want to focus on:
    • The prices of homes in the neighborhood – The prices of homes in one area are a good indication of how the neighborhood is doing. Houses that stay on the market for an extended amount of time and are continually having their price reduced is not a good sign of a healthy, thriving housing market. You need to look at the homes that recently sold, not the ones that are currently on the market. The ones that are currently on the market are not the most accurate predictors, as those homes are yet to sell.
    • The state of the public buildings and amenities – If the library, schools, and post offices seem run down and shabby, the neighborhood is most likely on the decline. If the streets are in poor condition, or there are not many restaurants or recreational activities available, you are not going to see many families looking to move to that neighborhood.
    • The state of the homes in the neighborhood – You are going to want neighbors who care about their home and property. If you see homes that seem to be falling apart, with yards that have not been cared for, you are seeing a lack of pride in both the home and neighborhood.
    • Proximity of hazards and industrial areas – Big factories and power plants are not going to attract most buyers. People do not want to live in a high pollution area where the risk of inhaling toxic materials is high.
    • Traffic – Though being located next to an interstate means an easy way to and from work, it also means more noise and busyness. A quiet neighborhood 10-15 minutes away from the interstate is much more inviting than a home that is continuously dealing with high traffic.
  2. Evaluating the condition of the property. Once you have information on the neighborhood, you can determine whether or not the price of the home you are looking to purchase is reasonable. If it is reasonable, you can move forward by evaluating the property. Unfortunately with foreclosures, you are not going to have as much opportunity to really inspect the home. An inspection is not always permitted, and even if it is allowed, there is not always enough time for one to occur. The most guaranteed inspection that you have control over and can make happen is an inspection of the outside of the home. Through looking at the outside of the home, you can begin determining whether the structure is in a good state. Look for doors or windows that seem to be misaligned and cracks in the walls. You should also take note of the roof. Does it seem to be slumping or have any damage that could result in leaks? Any damage in the structure of the house is most likely going to be an expensive repair.
  3. Evaluating the title. This is a very important step when it comes to purchasing a foreclosure. Everyone should make sure to search the title of the home. The title is going to inform you of any problems with the title of the property. A report is going to start with the current owner and work its way backwards through each previous owner. It will provide information regarding liens, deeds, and encumbrances regarding the property. Going through a title company is the best method to get this done. You are going to want a full report of the title. Discounted title searches that can be found online are not always going to provide the full analysis. If the company you go through were to miss an issue with the title of the property, it could cost you thousands of dollars.
  4. Evaluating the terms and conditions. In every purchase, there are terms and conditions that have to be agreed upon between the seller and buyer. With foreclosures, it is very common for the terms and conditions to state that the buyer will purchase the home as it is. Before reaching the point of having to purchase the home as it is, know what you are getting yourself into. Read all of the terms and conditions closely. You never want to be put in a situation that you did not anticipate: whether it be regarding how you are going to pay, when you are going to pay, or how much you are going to pay. The terms and conditions is a legal contract and should not be taken lightly. If there is something that you do not understand about it, have a professional help you.

If you skip out on any of these steps, the risk of running into an unanticipated problem is high. These problems could cost you thousands of dollars, reducing any profit you were going to make on purchasing a foreclosure. Buying a foreclosure is not a time to skip steps to speed up the process. It is a time to take each step slowly, ensuring that you have all the information necessary to make a wise and profitable decision.

Contact Paul Chunyk

Reach out to me, I would love to give you more details and get you headed in the right direction to accomplish your goals.

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