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The following is a guest post by Amanda Green. Enjoy!
Although recent indicators suggest that the housing market may be showing signs of life, trying to sell your home can still be a very difficult process these days.
Buyers are few and far between, realtors have been raising their fees, and lenders are tightening the purse strings for those looking for a fixed rate mortgage. Due to these reasons, more Americans are staying put than ever before. Our nation, historically defined by such trends as suburban growth and Western expansion, has ceased to be a mobile one in the face of economic struggles.
While there are many reasons, then, to stay in your current home rather than selling it, you still may be tempted to take advantage of the current buyer’s market. This is especially the case when it comes to foreclosures.
Although most bank-owned houses would carry little appeal on the open market (almost seeming like damaged money), there are foreclosed homes out there that are located in great neighborhoods, that have been recently updated and meticulously maintained, that would represent a considerable improvement in space from your current home – and that can be had for a fraction of the normal price. If you are diligent enough, then, there’s no reason why you shouldn’t be able to find the gems that pepper the foreclosure market.
But how can you pick out a gem when you see it? Here are a few considerations to keep in mind:
Know The Neighborhood
This is the essential first step to take when examining a foreclosed home. Even if the home is nice, the neighborhood may be lacking when it comes to safety and economic stability; most foreclosed homes sit in impoverished areas or on the exurban outskirts of cities.
But, if you do your research, these issues can be quickly resolved. Check the neighborhood’s foreclosure rate, its crime rate, and the reputation of its public schools. Websites like greatschools.org and city-data.com can be very helpful here.
Know The History
A foreclosed home that is being auctioned off for $50,000 may at first seem like a steal. But, once you look into the home’s history – its construction, its original cost, its past inhabitants – you may realize that the construction was shoddy, the place was left in disrepair, and that it may have been greatly overvalued during the housing bubble. For this reason, it is important to fully understand the history before buying something primarily because it seems like a great deal.
In today’s market, buying a foreclosed home with the intention to quickly turn it around for a profit is a highly risky endeavor. The housing market will not match the pre-2007 bubble anytime in the near future, and most foreclosed homes sit in areas that burst thoroughly when the bubble popped.
If you find a beautiful, recently-built, foreclosed home in an exurban suburb, you certainly may have found a great place to live for the next 20 years. But, don’t expect that you can quickly make a profit on this purchase – no matter how nice the home or how undervalued it may seem.
These are just a few considerations to keep in mind when searching for appealing foreclosed homes. In this buyer’s market, those gems are certainly out there, but don’t let yourself get fooled by a fake.
How about you all? Have you ever purchased a foreclosed property either as an investment or primary/secondary home?
If so, what attracted you to do so? What “red flags” did you have to be very cautious about?
If not, what made you stay away from looking at foreclosures?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Lenders being tight with fixed rate mortgages these days –
- This one is definitely true these days and very consistent with my experiences.
- When I was first trying to obtain a mortgage to buy my condo in early 2010, the mortgage broker I was working with was highly selective in what he needed in order to give me a mortgage.
- Essentially, he wanted to see a guarantee that I would be employed for more than one year in my current job. This was pretty amazing, when you compare it to stories during the real estate bubble years when you pretty much could get a mortgage just for having a beating pulse!
- @ The over-hyped danger of foreclosed homes –
- So, I’ll be the first to admit that I have absolutely ZERO experience buying or selling foreclosed real estate property.
- However, it is my un-educated opinion that the dangers of foreclosed real estate properties are slightly exaggerated in today’s society.
- When I was looking around town for condos to buy with my real estate agent, I inquired first about many properties selling for cheap prices (naturally, being the cheapskate I am).
- However, almost immediately, she recommended against ANY of the properties on the list I put together, either citing safety reasons or problems with the title or foreclosure.
- Personally, I just thought it odd that the real estate agent immediately dismissed the properties just for the foreclosure reason.
- I began to wonder – has it been her experience that foreclosures just aren’t worth the effort for normal real estate purchasers who simply want to find something as quickly as possible…??? Could be…
- What’s you all’s take on this? Are the headaches of foreclosed properties really that bad that most people should just ignore them?
***Photo courtesy of http://www.flickr.com/photos/aldon/2753028529/