For new aspiring homeowners, making that first leap into the real estate market can be a financially challenging one. Finding the perfect home that doesn’t break the budget can often lead potential buyers to feel like their purchasing options are limited.
Recently foreclosed properties have presented themselves as diamonds in the rough for many new home buyers looking for a great deal on their first purchase. With foreclosures on the rise in areas like Texas and Southwest Florida, there are no shortages of options available for those willing to take a chance on a repossessed property.
However, buying a foreclosed home isn’t as cut and dry as many other real estate purchases. There are some important considerations that should be made when closing on a foreclosed home, and knowing what to look for is essential.
Maintenance and Condition of Property
Its a very rare case that foreclosed homes are in perfect move-in-ready conditions. In fact, the opposite is usually true when it comes to the state of most repossessed homes, which tends to be one of the reasons they are priced to sell. Still, many foreclosure purchases can be great investments if the proper due diligence is done ahead of time. A detailed inspection of the home and surrounding property can be a good identifier for its relative condition. Look for signs of DIY renovations, as these are usually riddled with permit issues that need to be addressed and can prove costly. A contractor can also help you assess the integrity of the home in areas not overly visible. This will help to understand the amount of work and costs required to get the property up to code.
Research Comparable Real Estate Values
A good way to understand if you’re making the right investment in your foreclosed home is by comparing other real estate property values in the area. These properties should be in as close proximity as possible, within a half-mile radius. Compare the features of those properties with the foreclosure and try to find matching amenities, room counts, age, square footage, and style. You should also look for recent real estate sales that have gone through within the last 3 to
4 months. The value of these properties should help you decide if the purchase is worth it.
Understand All Costs
Weighing your costs will be one of the most important steps you take when purchasing a foreclosure property. Transparency is your ally and the more information you can get about the property the better understanding you’ll have about all the costs involved. When purchasing a recently foreclosed home, especially at auction, it’s typically best practice to paint the worst case scenario in your mind for certain repair costs. It’s better to come short of your repair budget than underestimate the total amount of renovation costs. When valuing your home for resale down the road, you’ll need to make sure that there is enough room for you to make a profit.
Consider Getting Title Insurance
One of the largest risks associated with buying a foreclosed home is lack of due diligence. Foreclosed properties typically sell fast on the market, leaving many people guessing on the real value of their purchase. Hidden costs can start to show up in the form of liens or past judgments still on the home from a previous owner. If you’re not careful, purchasing these homes can make you legally responsible for all these expenses. Investing in title insurance and other services protects you from fraud, property encroachment issues and other issues that can affect your ability to sell the property down the road. Title services can also give you due diligence ahead of time by thoroughly researching the status of a property to see if it is a good investment.
Purchasing a foreclosure property can be a great investment, but it doesn’t come without its risks. By taking the time to give due diligence to your purchase and protecting your investment through title insurance services, you can be sure that you make the right home buying decision.