There are good things to be had in buying foreclosure properties, as many Summerville investors are looking into them. The method of purchasing a foreclosure, however, can be a bit tricky to navigate, primarily if it’s your first time to do so. Fortunately, we can offer some advice as to how to successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal – so, you can add foreclosure properties to your next investment property search.
It’s important to note the difference between a traditional listing and a foreclosure. While traditional listings are typically homeowners or investors selling individual properties, foreclosures are properties that have been reclaimed by the lender or bank for nonpayment of the mortgage. Usually, after a property has been foreclosed on, a lender will recoup as much of the outstanding mortgage as they can by selling the property, often at a price below market value.
Hiring a real estate agent who specializes in foreclosures would be your next big step after you begin your search for foreclosed properties. These real estate professionals have an in-depth knowledge of the process and the local market, and they can give you insight that will be helpful to you in making your future decisions. Look for agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These designations mean that the agent has completed additional training in foreclosure property deals.
Getting the right real estate agent is but the first step; the next one would be to have your financing lined up and ready to go. Foreclosure deals can move very quickly, so best be prepared to make deals on the go. The most successful foreclosure buyers provide preapproval letters and other documents to the bank or lender in an attempt to demonstrate their ability to close the deal quickly. The last thing a bank would want is for it to hold on to a valuable property for lengthened periods of time. But, they will want to sell it for as much as they can, as much as possible. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Though the transactions might be fast-paced, don’t forget to do your due diligence. Run your numbers and locate comparable properties in the area before making any offers. In very competitive markets, you might need to offer a bit more than the initial asking price to appeal to the bank or lender. If this holds true, then this higher price should be included in your calculations.
Over the proceedings, pay close attention to potential red flags. Case in point: hidden liens on the property. This is not something you want to find hidden under a deal. Common sense dictates that if the previous owners stopped paying their mortgage, it’s possible that they failed to pay some or all of their other debts. Unpaid property taxes and other debts can result in liens against the property that will need to be paid before the title can be transferred into your name. Another big red flag is serious repair issues or missing things.
It’s not unusual for a foreclosed property to have cosmetic issues but, there are those that have seriously neglected or even intentionally damaged the property before they are forced out by a foreclosure. Angry owners and tenants have been known to strip the house of anything of value, including copper pipes, fixtures, doorknobs, and even cabinets. Don’t rush into a hasty decision, all because you found a “good” deal. This deal might turn out to cost you more in repairs than in actual investment.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. However, with a team of competent property investment managers, it’s easier to find a bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Summerville, make sure you have the right team managing your investment property. To know more about what Real Property Management Charleston can do for you, please contact us online or give us a ring at 843-900-4061.
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