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Things to Know in Buying Foreclosures
Filed under Real EstateJun 25Before you go along with the crowd that believes all foreclosures create bargain sales – especially since the properties are often in areas of high crime – be aware that foreclosures come in all prices. Some are bargains and some are not.
The Real Deal About Foreclosure Prices
Finding foreclosed properties being sold for 30-40% less than their market value is not as common as locating those being sold for just 5% less. Prices mainly depend on the condition of the houses as appraised by the lender.
Even the environment of the home will affect how they price it. Therefore, although this does not typify foreclosures, you might find a cheap foreclosed home in a crime-ridden neighborhood. In fact, these types of neighborhoods most likely hold the cheapest foreclosed properties if you’re comparing homes of equal condition.
What to Expect
What you should NOT expect is to find an inexpensive house in relatively good condition where you sell it for a huge profit. Most likely, that type of home would be more readily available in a less desirable part of town.
As a result, you might then have a problem either attracting somebody who will buy it at all, or coming across someone who wants to buy and has that kind of money available for a purchase.
In the situation where you’re actually in a well-kept neighborhood, you can pat yourself on the back; but that’s somewhat of out of the norm. Otherwise, you’ll probably either have to unearth a person who wants to buy the home and rent it out, or you’ll need to rent it out yourself.
It’s More Work Than You Think
No matter what you’re looking for and where you suspect you might find it, it’s going to take some time and effort (“sweat equity”) to locate the best deal. Remember that this is a business deal for the bank. They aren’t just trying to get homes off their hands – they’re selling.
If you do find something inexpensive, start off with some healthy skepticism. Between eviction issues and all the repairs a lot of them need, your work isn’t finished.
A Final Note
Though it may not be quite what you thought, there still might be a foreclosed home that will work for you. In this ugly economy, there are many types of foreclosures for a wide range of prices and in various conditions.
Don’t expect to pinpoint the “perfect” home for a steal. If you do, great. But that just isn’t the norm. For example, you might identify nice, waterfront property that’s been foreclosed, and this is where you’ll usually see just a 5% reduction in price from the market value.
You go for inexpensive if you don’t mind repairs and/or a rougher neighborhood; you’ll pay more for a quality home. Though perhaps disappointing, you will likely not find both in one foreclosure deal.
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