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In the current real estate market, the number of foreclosures is expected to double from the previous year. While this is creating problems in credit markets and is causing financial problems, it also opens a window to get property at a lower price than you would pay elsewhere. Purchasing foreclosed homes and short sale properties is a great way to save money on your investments, all it takes is the willingness to do a little more work. Buying after a foreclosure does have some risk attached, so it isn’t guaranteed success, but the opportunity is often worth the risk
So, how do you purchase a foreclosed home or a short sale? You should start by locating an area where you are interested in purchasing a property. From here, you have to look for foreclosing properties, so let local real estate agents know you are looking for foreclosures, they will do a lot of the foot work for you. You should also contact lending institutions to see if they have any properties going into foreclosure.
Once you start getting the information on foreclosures, you can investigate the properties. This can help you determine the market value, so you know how much you have to put into it to sell for a profit. You’ll also want to investigate who owns the property and whether there are any liens on it. From here you can start negotiating with the lender about purchasing the property and how you will finance it. You may even be able to assume the previous loan. This process can be complicated, so be prepared to do a lot of footwork before you actually purchase the home.
Short selling is a similar process, but it actually occurs before a property enters foreclosure. Short sales allow a property to be sold at a lower price than the remaining mortgage, but they are difficult to arrange. The seller must already be in default on their loan for the bank to consider this option. This means their property is likely worth less than the remaining balance on the loan. Unfortunately this poses a problem, because the bank is going to expect the market value of the home out of the purchase. You want to research the home’s value, potential problems, and especially determine if there are 2 mortgages. A second mortgage usually means a short sale is impossible because it would result in the second lender being wiped out.
A short sale involves negotiating with 2 parties, a home owner and a bank, and because of this it will take a longer time to close than a regular sale. That being said, it is also a home that has not yet been moved out of, so you are better off than when purchasing a foreclosure. In the end you only want to make a purchase that is a good deal, so don’t get into a sale that isn’t worth it.
Posted: March 7th, 2008 at 2:31 pm |
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Buying a home for rehab is an involved process, one that you should not go into unless you are prepared to invest time and money into. The value of a rehab is that you can usually get a home that needs repairs for a substantially lower price than a completed one. If you are able to put time and energy into it yourself, you will save money on the repairs and therefore when the value of the home goes up upon their completion, you will net the profits. By focusing on specific improvements you can greatly benefit your homes value, while some are less valuable.
You want to purchase a home that already has working plumbing, heating and electrical systems. These are all expensive improvements that will not be noticeable when selling your home. If you are purchasing a home that needs these improvements, make sure you have the costs necessary to fix them taken off the price. From here you can move on to more cosmetic improvements. Bathrooms are a great start, as new fixtures can make an older looking room very modern. As well, much of the work can be done yourself. From here, move on to floors, putting in new carpeting can drastically change the look of a room, and hard wood will certainly raise your asking price, though it does require more of an investment. If the home has a fireplace, putting in a new one will also add value.
Kitchen improvements can be more expensive, so they should only be done if the oven or refrigerator is very old. New counters are cosmetically appealing, but can be a hassle to install. A universally appealing improvement is new windows; this is for a few reasons. First, they are attractive, and second, they provide great energy saving benefits, as insulated windows will reduce energy costs. You will want to specifically advertise the new windows and if you put in new carpet, mention that. These are selling points your customers will be looking for.
Painting rooms is always an option, it will give the room more variety, and it is very inexpensive if you do it yourself. Most of these improvements can be done yourself. Carpeting or floors will set you back more, but it will be apparent you put the resources in when your buyers enter the home. This benefit will help sell the home, and that’s what all this is really about.
Posted: March 7th, 2008 at 3:36 pm |
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