5 Mistakes to Avoid When Purchasing Foreclosed Properties

Everywhere you look Americans are reminded of the number of increasing Foreclosed Properties. But for many Real Estate Investors, one person's tragedy can be another person's good fortune.  With so many foreclosures on the Market, this can be a Once-in-a-Generation Opportunity for many People. Still, the purchase of foreclosed property remains a complex and involved process where plenty of would-be buyers can make costly mistakes.     Here are my Top 5

1. Searching without a Realtor:     While seasoned Real Estate Investors can certainly get away with going through the traditional home buying process without a Realtor, foreclosed real estate is another matter.  These transactions can be complex and require the expertise of not just any real estate agent but one with a background in buying and selling foreclosed homes.  Do some research and find a Realtor with foreclosure experience in your market.

2. Searching too broadly:     With so much Inventory and even more coming onto the market, it's easy for buyers to become overwhelmed.  Buyers should target a specific Neighborhood and contact a Local Realtor.  Buyers should be specific with their Realtor as to the Preferred Location and Property type they want. Your Realtor can also set up "Automatic Searches" that meet your requirements once a property becomes available.

3. Thinking short term:     Since many foreclosed properties may decline further in value in the upcoming months, it is important that Buyers approach the purchase of Foreclosed Real Estate with a long Term Goal in mind.  If you are just trying to cash in on a quick flip, don't buy a foreclosure. Only Seasoned Investors with the resources or Buyers who can afford a fully amortized fixed-rate mortgage should consider buying foreclosed property.

4. Seeing only the Sale Price:     While the Sales Price of many Foreclosed Properties are priced significantly less from what they were a few years ago, Buyers need to also be aware of Maintenance and Repair costs to these Properties. It is recommended that Buyers set aside anywhere from 10% to 15% of the Sales Price when considering this type of a purchase and also keep this in mind when they are negotiating.

5. Not familiar with the Law:     Many Buyers are surprised to learn and find out that "Foreclosures" are indeed heavily regulated with each state having its own unique set of laws. Buyers also need to be aware that Realtors are not Lawyers; therefore serious Buyers should always review the Foreclosure Laws in their State and obtain qualified Legal advice from a Local Attorney.

While many Buyers can certainly get good deals on foreclosed properties, it's a mistake to assume that banks will accept any and all offers.  Banks have little desire to sell houses, so they typically outsource their Properties to Realtors. While Realtors do want to get the properties sold off quickly, they also want to get a good price so that the bank will give them additional business. A lot of people just assume that because this property is bank-owned they will just take half off and that's just not true.

So, my best advice would be to hire a Realtor and start building a team of knowledgeable Professionals that can help you and make sure that they represent YOU... not the bank.