There are a lot of great deals waiting for Ellsworth investors who are looking to buy foreclosure properties. The manner of purchasing a foreclosure can be a bit tricky to navigate, though, all the more if you don’t have any prior experience. 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 – helping you 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. Often selling at a price below market value, lenders will mostly try to recoup as much of the outstanding mortgage as they can by putting the foreclosed property up for sale.
If you feel like you’re ready to commit to searching for foreclosed properties, an important next step would 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. So, make sure to heed their counsel before rushing to any decision. 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.
With the right real estate agent, you can focus on getting your financing lined up and ready to go. Foreclosure deals can move very quickly, so best to put yourself in a position where you can make informed decisions at a moment’s notice. 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. Banks will want to profit off of valuable property as soon as possible. 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.
The process might be fast, but that shouldn’t be an excuse for you to 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.
In the course of the transaction, pay close attention to potential red flags. In line with this, it would be a good idea to check for hidden liens on the property. This is one example of a detail you should know before making any commitments to the other party. One can suppose that the previous owners failed to pay some or all of their other debts, especially when they stopped paying their mortgage. 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 shouldn’t come as a surprise that a foreclosed property has cosmetic issues. There are some, however, 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. Make it a point to examine the actual value of the property and how much it will cost to cover the repairs. You don’t want to end up paying more than what you bargained for.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. With a willingness to take risks and a few people who are willing to help you, you can definitely 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 Ellsworth, make sure you have the right team managing your investment property. If you want to know more about what Real Property Management Acadia can do to serve you, don’t hesitate to contact us online or call us at 207-561-7482.
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