Over the past few years, I’ve thought a lot about buying investment property. In the long run, I’d love to build a portfolio of rental properties. We have not, however, had the time to make it happen. Given the recent history of housing market, perhaps this is a good thing.
Of course, those same housing troubles have now (arguably) created a lot of opportunities. In many areas, home prices have fallen dramatically, and the number of foreclosures has skyrocketed.
Given the above, a recent article in Money Magazine that provided tips for buying a foreclosed home piqued my interest. For starters, they pointed out that (nor surprisingly) it’s easier than ever to find foreclosed homes. Beyond that, they offered the following four tips on the mechanics of the process.
Tips for buying a foreclosed home
- It’s best to buy from a bank. If you buy a foreclosed home at auction, prior to repossession by the bank, you may have to pay cash, and you may not be able to inspect it. You might also discover that there are existing liens against it. When a back repossesses a home, they should clear any outstanding liens.
- Bring in a contractor before you buy. Foreclosed homes have often been abandoned, and possibly vandalized. Instead of simply relying on a home inspector to point out the flaws, bring in a contractor and ask for an estimate of how much it will cost to fix everything.
- Bid low. Banks often list their foreclosures at market prices, so be prepared to haggle with them. If the home you’re interested in has been on the market for awhile, or if the bank has a large number of foreclosures on hand, they’ll be more willing to deal.
- Be prepared to wait. Many lenders are dealing with a huge number of properties, and it might take them awhile to respond. According to the article, the wait can be as long as three months (!) in some cases.
Having never been through the process myself, there’s not a whole lot I can add to this. Obviously, it’s very important to do you homework, as making a mistake could be very costly. If you’ve been through the process of buying a foreclosed home, I’d love to hear your thoughts.