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Bob Schwartz
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Certified
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Pluses and Minuses to Home Foreclosure Investing
Are you a new investor? If so, you have probably taken the beginning
steps to being a good investor. Now you are ready to take the final steps to
locating property and investing. Bank owned foreclosure property should be
on the top of your list. This specific property is owned by the bank and is
sometime referred to as REOs (Real Estate Owned). There are some advantages
to buying bank owned foreclosure properties, and it seems that every
investor wants to get a piece of this market. Consider purchasing a property
listing. This list will include information regarding properties that a bank
owned, the asking price of the homes and other valuable information.
According to Investopedia, repossession of a home, is defined as ‘a
situation in which a homeowner is unable to make principal and/or interest
payments on his or her mortgage, so the lender, be it a bank or building
society, can take control and sell the property as stipulated in the terms
of the mortgage contract’. With our economy going the way it is, this is
becoming a reality for more and more people. For a homeowner, this is a
pretty scary word. But sometimes it can actually be a blessing in disguise.
There are advantages and disadvantages to purchasing foreclosure bank owned
property.
The most obvious advantage is the asking price by the bank for the home. The
home will be marked substantially lower than market value. The bank will
think about removing some or all liens and fees on the bank foreclosure real
estate in order to get it on the real estate market and resell it to the
public. This does not necessarily mean the home is in bad form or not worth
investing in. It is marked down because the bank wants to get rid of the
property as fast as possible through a quick sale. The original owner’s
unsuccessful attempt at a sell will not stop the bank from trying to make an
effort to get the bank foreclosure real estate sold. The bank asking price
for the property will be considerably below market value in order for this
to happen. This is a great opportunity for an investment and hopefully the
investor can resale the property and make double that amount in return.
However, there can be a substantial downfall to purchasing bank owned
foreclosure property.
Most individuals do not purchase anything without checking the item. If you
went to a store to buy new clothes, even if the clothing is on the clearance
rack, you would inspect for flaws. Well, foreclosure bank owned property is
typically sold as is. Generally home owners whose houses are going to be
foreclosed most often are going through financial crisis so it is better to
give them the hopes of getting money the fast way. One way will be to run
advertisements like “houses bought for cash” etc. They may have invested
thousands of dollars into making the home large by adding rooms or an extra
bathroom and due to unseen situations have now lost their home. If you do
not have the opportunity to inspect the property first any errors to the
home will become your costly expense. This is truly one great disadvantage.
Some will go as far as smashing up the home or taking everything they have
put into it out. New sinks, ovens, ceiling fans, toilets and more. Its
theirs and they want it. This leaves the home with considerable damages,
costly damages.
Some states need the bank to present all buyers a disclosure with a
summarize discovery of property damage. Such as, damage to the roof,
plumbing issues or electric problems. This disclosure is valuable to
investors and home buyers alike. Talk about this option with the bank that
you are working with. If they are not lawfully required to offer you with a
disclosure ask if you are able to have the home checked and how much time
you have to do so. Some bank owned properties are not available for
inspections or your viewing. If this is the case it may be wise to just
drive around the neighborhood of where the property is located. Talk to
neighbors and get an idea about the people who once lived there. You never
know, someone may have seen the property before repossession.
However, investing comes with its advantages and disadvantages. This is a
risk most investors are willing to take.
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