Buying a cheap foreclosure property may sound like a great deal. But I see lots of foreclosure problems in my work as a real estate professional.
Yes, I know that there are books and seminars out there that say purchasing foreclosures is the way to wealth, fame, and glory. Be afraid… be VERY afraid!
I only recommend foreclosure purchases to my very most sophisticated and experienced investors. The major foreclosure problems are:
What you know is that you are purchasing a property that failed to maintain its value – otherwise it would have already been sold at market prices. Ouch! You MUST understand the underlying problem for this property’s poor performance. If the neighborhood as a whole is not appreciating, would your money be better spent elsewhere?
What you don’t know is the condition of the property. Foreclosures are sold “as is – where is”, and there is absolutely no recourse. In a normal sale, known defects and flaws must legally be disclosed. But there is no such requirement for a foreclosure. In fact, I have seen cases where angry ex-owners actually sabotaged the home on their way out the door – up to and including sawing through the load-bearing beams in the structure.
Timing is another issue. If you are in a hurry, simply do NOT attempt a foreclosure deal. Banks, in particular, can take months to even respond to an offer.
Discipline is needed, especially of the financial sort. You must have clear financial goals, rational targets and strong neighborhood comparables. Do NOTfall in love with a deal. If it is even a tiny bit outside your financial parameters – walk away. Because #2 above (What You Don’t Know) WILL get you!
Lastly, you must have your Skilled Labor lined up and ready to go. This means reliable plumbers, electricians, a/c repairmen, roofers, painters, etc., etc. Don’t try to do this all yourself, no matter how “handy” you are. You must always remember that time and money are inversely proportional.
Having said all that, I am happy to say that Roger Martin Properties can do this type of sale when appropriate.
But be warned – I will talk you through the foreclosure problems ahead of time in a manner that makes the “what are your intentions to my daughter” lecture look like a walk in the park!