In looking for an attractive bargain, plenty of Blacksburg investors deem buying foreclosure properties. But in reality, the process of purchasing a foreclosure can be a bit tricky to navigate in situations where you’ve never done it before. Having said that, with a few tips on how to successfully buy a foreclosure property – and how to know warning signs alerting you to be vigilant and walk away from a deal – helping you add foreclosure properties to your next investment property search.
It’s relevant 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. If a property has been foreclosed on, the lender can generally work to recoup as much of the outstanding mortgage as they can by selling off the property, often at a price below market value.
When you can begin your search for foreclosed properties, your next approach can then be to hire a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market and can thus be a practical source of helpful advice and extensive information. Go after agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These titles mean that the agent has done additional training in foreclosure property deals.
In addition to finding the right real estate agent, you must see to it that you have financing lined up and ready to go. Foreclosure deals can move very quickly, so you need to be able to do so, too. 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 seeks is to sit on a valuable property for longer than necessary. But they still like to collect as much as possible for it. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Although things are moving so fast, 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 may need to offer a bit more than the initial asking price to appeal to the bank or lender. In such a case, then this higher price should be included in your calculations.
During this whole course, pay close attention to potential red flags. For example, it is relevant to check out meticulously for hidden liens on the property. It is common sense to expect that if the previous owners stopped paying their mortgage, they may certainly have failed to pay some or all of their other debts, as well. 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.
Though certain cosmetic issues are prevalent in a foreclosed property, some people could 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. According to how extensive the called-for renovations are, you may see in the end that what looks like an excellent deal could turn out costing lots of money to renovate and improve.
Buying and possessing foreclosed properties is a decision each investor will need to make on a case-by-case basis. But the good news is that with the right staff on your team and determination to deal with some kind of risk, you just might discover a great bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Blacksburg, make sure you have the right team managing your investment property. Contact us online or call 540-998-6917 and speak to a team member of Real Property Management Insight today!
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