According to RealtyTrac, 1 in every 2043 homes is foreclosed in the US. This means that there are plenty of opportunities available for buyers and investors, particularly those who are willing to invest in foreclosed homes.
The problem is, buying a foreclosure is no easy task. The process is complicated, and you run the risk of making costly mistakes if you didn’t do any prior research. To know which mistakes to avoid, here are some of the most common mistakes that most buyers make when buying a foreclosure:
1. Going Solo
One of the most common mistakes buyers make is going solo. That is, without seeking the help of a real estate professional. Whenever you plan to make a real estate investment, it is necessary to seek the help of individuals who are proficient in the current market to avoid wasting money for nothing. This applies whether you’re looking for a short sale, pre-foreclosure, or any properties owned by a bank.
2. Having No Knowledge about the Legal Implications
Not knowing about any legal implications in your area can only make you spend more than you can save. Having a real estate agent to handle legal proceedings for you isn’t enough due to the complications and variations in foreclosure laws from state to state. You will need a real estate attorney to deal with any legal proceedings concerning the foreclosure laws and regulations in your area.
3. Skipping Home Inspections
Investing in foreclosed homes without conducting a thorough home inspection is one costly mistake. If you fail to conduct a home inspection of your preferred property, you will end up having to deal with any serious damages later on.
Don’t settle with a home inspector that’s recommended by your real estate agent. You should instead do your own research by searching for an independent home inspector from the American Society of Home Inspectors.
4. Thinking Short Term
Most foreclosed homes will decline in value after a few months. Hence, you need to consider how a foreclosed property will fare in the market within the next few years. Look at the property in a long-term perspective. Don’t be so quick to flip a property as you might not be able to make it happen. If you’re just aiming to earn money by doing a quick flip, then buying a foreclosure is not for you.
5. Spending More than Initially Planned
It’s not advisable to spend more money than what you have planned. Instead, you need to set a maximum price within your budget that is close to the foreclosed property’s actual market value. Afterward, allocate at least 10% of its value for any possible repairs, renovations, or replacements. If the total exceeds 25% of your net home pay, then it’s better to look for another foreclosure.
Buying a foreclosed property isn’t a one-step process. It involves careful planning, having the right knowledge, and working with the right people. Don’t skimp on the essentials just because you have done your research and believe you know everything there is to know about foreclosures.