Whether you’re buying a home for your family to live in or you’re an investor, buying a foreclosure can be an incredible opportunity. As you get ready to start the process, there are some important Do’s and Don’t’s to help you succeed:
Do have a strategy
Knowing why you’re buying and what you intend to do with the property can be the key to making the right purchasing decision – both in terms of the house itself and the neighborhood where you’re shopping. Having an “exit strategy” means knowing before you make your purchase if you’re going to be living in it, flipping it for a profit or renting it out. This will govern a number of choices you make during the buying process, including financing, choosing a specific type of house, deciding what to upgrade in the home, etc.
Do know the market
The market changes everyday, and your local market changes even faster. It is affected by the number of foreclosures in the area, by the number of investors bidding for those properties, by the amount of bad debt weighing down the lender and many other factors. There are also more favorable days to submit an offer.
One of the best ways to know your market is to take advantage of a resource available to you for FREE: The Preferred Partner. The Preferred Partner is a Buyer Agent we have selected for each particular property based on that Buyer Agent’s knowledge of that neighborhood and that type of home. Choose a Preferred Partner and call them today.
Do use all available resources
Study all the information available for your chosen listing. Learn about the past year’s tax assessment, comparable sales, sales history and any other data available. Use the calculators to determine the monthly mortgage payment you can afford, your estimated closing costs and a host of other factors that will influence your purchase.
Do plan for the unknown
This is especially true when buying at an Auction. Buying a foreclosure at an auction sale can be a fast-paced process that seldom allows for a buyer to inspect a property prior to bidding. You should prepare an estimate of how much you will have to budget on possible repairs and improvements. Having a best, worst, and most likely case budget plan in place can help you determine the maximum you are prepared to bid on a property, and will also determine what your limits will be prepared to accept before taking on the project.
Don’t bite off more than you can chew
Take each step of the purchase and do the best you can do at that step. Write down the steps and check them off. Each step will be a learning experience and make you more confident in buying foreclosures in general. Don’t get into properties or transactions that are more complex than you can comfortably handle. Don’t hesitate to ask for help! Consult with your Preferred Partner, consult with our Customer Service department, and take advantage of our tutorials. Think of every step as an opportunity to learn. Take your time and proceed responsibly. The initial returns on your first foreclosure investment may be modest, but the knowledge and expertise you will gain from the process will put you on the longer road to success and profitability.
Don’t underestimate the foreclosure process
The foreclosure is a process full of nuances. Each state has its own set of foreclosure laws. A a new investor you should familiarize yourself with the foreclosure laws of your state. Also, depending on what type of foreclosures you will choose to buy (pre-foreclosures, foreclosures at auctions, government foreclosures, bank foreclosures, or an FSBO) you should try and get acquainted with the possible problems that can come up. Knowledge is power. By arming yourself accordingly, you’ll feel more confident in your ability to deal with whatever may arise.
