Over the past few years, much has been written about people who have “made a killing” buying and selling foreclosures. While it’s true that there have been many successful investors who have bought and sold foreclosure homes and made large profits, it should not be viewed as a guarantee that the same results will be achieved by everyone. Investing in foreclosures takes commitment, time, knowledge, and money. If you are willing to make the commitment and have an adequate reserve of these resources, there is a strong possibility that you will succeed and reap the rewards of foreclosure buying.
Do you think you are ready to take the plunge? We will help teach you how to buy a bank owned home. If you are, here are a few Do’s and Don’ts to consider as you start your search of foreclosure listings:
Do have a plan
Buying a foreclosure can be exciting and obviously profitable, but don’t get distracted by potential dollar signs. Develop a strategy and plan of action before you start looking. Not only is it important to know the reasons why you want to buy foreclosures (i.e. as an investment opportunity or to live in), but how you are going to minimize project costs, stay organized, stay on schedule and sell the property when its time.
Do know the market
The real estate market is an ever-changing beast. One minute it is a buyer’s market, the next a sellers. One day you are dealing with low interest rates and favorable loan terms, the next day those interest rates have skyrocketed and lenders are hesitating to write loans. One month you may find only one or two potential foreclosure listings that fit your criteria, the next month you may find multiple foreclosure offerings. Regardless of whether you are purchasing a foreclosure as a home to live in or as an investment property, knowing the current state of the national market, as well as the specifics of your local real estate market is important.
Do use all available resources
There are numerous resources available for those interested in buying foreclosures. Foreclosure listing sources range from public notices in local newspapers and courthouse records, to premiere listing services such as ForeclosedHomes.com which provide extensive nationwide listing of pre-foreclosures, bank foreclosures (REOs), for sale by owner, and for sale by realtor properties. Use as many sources as you need to find what you are looking for. Also, take the time to talk to the professionals. Real estate agents, bankers, lenders and tax accounts are not only great resources for finding foreclosures, but they can provide you with a wealth of information and expertise when it comes to dealing with the foreclosure process.
Do plan for the unknown
Buying a foreclosure at an auction sale can be a fast-paced process that seldom allows for a buyer to inspect a property prior to bidding. This means that you will have to estimate how much you will have to budget on possible repairs and improvements. Having a best, worst, and most likely case budget plan in place can help you determine the maximum you are prepared to bid on a property, and will also determine what your limits will be prepared to accept before taking on the project.
Don’t bite off more than you can chew
It's easy to get caught up in buying and selling foreclosure homes. Often, new investors get side-tracked by the potential profits that they can make and bite off more than they can chew, taking on foreclosures that are beyond their expertise. Baby steps will get you a lot further in the long run. Take your time and proceed responsibly. The initial returns on your first foreclosure investment may be modest, but the knowledge and expertise you will gain from the process will put you on the longer road to success and profitability.
Don’t underestimate the foreclosure process
The foreclosure is a process full of twists and turns. Each state has its own set of foreclosure laws. A new investor needs to familiarize themselves with the foreclosure laws of their state. Additionally, depending on what type of foreclosures you will choose to buy, i.e. pre-foreclosures, foreclosures at auctions, government foreclosures, bank foreclosures, or for sale by owners will require a familiarity with the possible problems that can arise. Knowledge is power. By arming yourself accordingly, you’ll feel more confident in your ability to deal with whatever may arise.
If you have any questions at all, or want to learn more, call Fuquay Varina Real Estate today.
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