5 Common Pitfalls of Purchasing A Foreclosure Property
There are continually more and more foreclosure properties that are being put up for sale everywhere you turn in Colorado. Of course, this can be very tempting for homebuyers as people can sometimes get properties for well below the current market value. In Colorado the market is quickly becoming a sellers market and the amount of properties on the market have been decreasing. That low offer you used to get away with may no longer fit in todays market.
However, if you are considering a foreclosure property for your next purchase, then there are some common pitfalls that you will need to avoid along the way to protect yourself and your future asset. Let’s review some areas to be aware of before making any serious offers.
1: Avoid Making Emotional Offers: When you are planning on putting a bid down on a property, you need to be extremely confident with the home’s current condition, its true market value, and what will be needed to fully restore the property.
Too many buyers will think that they found a slamming deal and fear that they will lose the home to another bidder. So instead of taking the time to truly do their homework and complete the proper inspections and analysis, they can end up locking up a property for more than it is actually worth.
On the other side of the coin you might offer way too low and not even be in the ballpark. There are many great deals out there, but remember TV shows highlight the best deals and your Uncles best friends neighbor may not of actually got that $250,000 house for $50,000 after all.
2: Estimate Neighborhood Values: Consider what other comparable properties are selling for and talk to a real estate agent who has a working knowledge of the area. In fact, it’s a wise decision to thoroughly review these questions and any other recommendations your Realtor may make:
Is this neighborhood a desirable location and how are crime rates?
What schools would be available for my kids or future buyers?
Were there any other foreclosures or investor sales that could negatively affect the future value of my home?
How long do I plan on living there and how could that affect things?
What type of appreciation should I expect?
3: Get Pre-approved: Before you even start looking at homes, you must get pre-approved on a mortgage in order to know exactly what you can afford. Sadly, many buyers can miss out on some phenomenal deals or spend hours of wasted time because they avoid this step. Show banks that you are a serious buyer and have your financing in place!
Depending on the situation you may look into 203(k) financing. This is an amazing FHA loan program that allows you to borrow the funds needed to fix your property. You just add the amount needed on top of the purchase price and as long as the property will appraise for the total amount after repairs you are well on your way. Obviously, there are specific guidelines that need to be met to qualify, but we are more than happy to go over them with you.
4: Get Professional Help: Not only should you seek the expertise and of an experienced Realtor, depending on the situation you may also need guidance from a real estate attorney or financial consultant as well. Each professional can ensure that you are making the right choices throughout the process and can protect you from any issues you may come across along the way.
Does the property need repairs? If so, you may need to hire a professional(s) to assist you. Hiring a third party inspector to look over the property is highly suggested. This can save you a lot of heartache and a lot of money in the future.
5: Avoid buying properties site unseen. There are plenty of stories out there where a buyer finds a great deal and makes an offer on it without ever taking a step into the property only to be completely overwhelmed once they do. If you don’t have a choice, make sure you have a Realtor and/or an inspector look over it thoroughly before you make an offer.
Remember that there is a lot more than meets the eye when you are trying to buy a foreclosure property. Negotiating with the banks, filling out paperwork properly, and undergoing all the necessary inspections can be a very detailed and tedious procedure.
Working with a professional Realtor who has the experience, tools and knowledge is a must. If you are looking in Colorado I can introducde you to a group of Realtors who meet those standards. Otherwise, do your research and find the right agent to work with you.
As always I am available for any of your home financing needs. You just need to ask. :)
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