Are You Really Ready to Buy a Foreclosure?
Foreclosure properties still offer huge discounts for home buyers looking for new residences, vacation homes and investment properties but are you really prepared for the potential work involved?
Recent figures from RealtyTrac show the top 10 states for foreclosure discounts compared to regular selling prices ranging from 47% in Louisiana to 36% in Georgia but these bargains often come with a price. Even $10,000 foreclosure homes can turn out to be teardown and new construction projects running up tabs well over $100,000.
It’s all about how much discount on the front end is worth the potential work lurking after closing.
Do you know how many tens of thousands of dollars it will cost to teardown a foreclosure if you find too many problems after you buy? How much more will it cost to rebuild?
Even if your work is limited to rehabbing properties or what appears on the surface to be a little clean up and cosmetic makeover how much can you handle yourself, do you have enough cash reserves to account for overages and carry the overhead?
This all means cash money out of pocket unless you are using an FHA 203 (k) rehab loan, Fannie Mae HomePath financing or qualify for another type of rehab mortgage loan.
Make sure conduct thorough inspections and get multiple quotes from contractors. If you plan to resell after fixing up your foreclosure you need to know the ‘subject-to’ value or ARV, as well as which improvements will yield the best ROI and increase the actual appraised value.
If buying a home as a residence or rental property is it wiser to just buy a home which has recently been remodeled and be able to finance the improvements and enjoy the peace of mind of a brand new property look, feel and smell?