Beneath The ?Dirt? of a Foreclosed Property

I was sitting in a local restaurant by myself for lunch this week when I overheard two gentlemen talking about foreclosure properties. Both of these men had their own opinions regarding the market and where to find the best deals. It was interesting listening to both men’s opinions and interesting enough, both of them were wrong. It is amazing how many people claim to be subject matter experts but have no formalized training or accreditation to support their hypotheses.

 

According to national statistics there are approximately 2,203,295 foreclosure filings and about 1,285,873 foreclosed properties on the market today. The substantial increase in foreclosures has flooded the supply of available properties which then forces home values to decrease. We all learned about supply and demand in high school economics class and many home owners are feeling the effects today.

 

Finding that deal may not be as easy as it may seem, you need to look beneath the dirt. Understanding the value of a home, cost of repairs and legalities of submitting an offer is critical and you need the help of a licensed Real Estate Expert to navigate you through the foreclosure maze. Get with a Realtor team that has the resources and connections to help you with every step of the purchase transaction.

 

Great Realtors, or as I call them the top 1%, will have a “Dream Team” that will be able to work with the client. They will have a solid mortgage broker, a reputable property appraiser, a reliable insurance agent, a mold consultant, a conscientious property inspector, an esteemed general contractor and a renowned ASP certified staging professional. Being able to go to one Realtor and obtain all the necessary professionals to complete a transaction is critical.

 

Having a team of these professionals will reduce your exposure of making a mistake and buying a home that is not of value or has too many substantial repairs to make it worth the investment. It is important to use a professional Realtor who is experienced, trustworthy and a true professional.

 

Here are some essential tips you need to know when you start your foreclosure prospecting.

 

Pick out a geographical area that you would be okay with living, even if this is a property you plan on using as an investment. It is easier to rent a property with outstanding schools, shopping and amenities. Understanding and qualifying the benefits of a surrounding area will ensure you are picking a good location. A Realtor can provide you with any additional information you may need to pick the area. Understand and research the average dollar per square foot for homes in the area you are looking. If you are looking at foreclosure properties that are $ 39 per square foot and the average home price is currently selling for $ 52 per square foot are you getting a great deal? The truth in the matter is that if the property you are looking at is a 3 bedroom, 2 baths, and 2 car garage property and is 1700 square feet, your deal is only $ 22,100 less than the average home price. Now add into that your repair cost then ask yourself again is this a good deal. If your repair cost in this example exceeds 50% of the difference, you are probably better off not purchasing a foreclosure and going with a turn key property. Understand the foreclosure law in your own state. You can research this easily enough on the web. You should know the difference between Foreclosure by Judicial Sale and Foreclosure by Power of Sale. You will need to pick a 1% Realtor to assist you in selecting properties. They will listen to what you are looking for and search for homes that exceed your criteria but still within your price range. They will be able to conduct a market analysis on the area to provide you with sales data of homes that sold in that area. They will also arrange for all the showings and provide you with listing flyers that give you pertinent information. And as stated earlier, a 1% Realtor will give you access to their Dream Team of real estate professionals. Once you narrow your search down, you will need to determine an offer. How much should you pay is a question that your Realtor should be able to help with. Extremely inexpensive homes that are substantially lower in price than the market average maybe the best buy depending on the repair cost. The only other advice I can give on making an offer or bid is you need to be decisive and take action. I have had several clients second guess the market and like the two men from lunch determine that the market has not hit bottom yet and that there are better deals out there only to have the right property sold from right under their noses. The great deals don’t stay on the market long so you need to be able to act fast. Most banks require proof of funds or for you to be pre-qualified before you bid or make an offer on these foreclosed properties.

 

The bottom line is there are great deals beneath the dirt of a foreclosure. Having a vision of what that looks like for you as the buyer is important. Understanding what you are looking for in a property a year from now is the perspective that you need to have. Many clients that buy homes spend money on remodeling, changing out carpets or cabinets, or putting in new floors. If you are going to go through and spend money on a property improving it to your taste why not get that property at a bargain-basement price. If you are interested about Real Estate Dream Teams please see my website www.fortmyers-naples-realestate.com.