Foreclosed homes are a smart investment opportunity. In most cases, these properties are owned by the bank and are available on the market at greatly reduced prices. However, there are some pits that you could risk falling into if you invest in such properties without proper knowledge. Read on for four of those mistakes to avoid.
1. Not Hiring a Real Estate Agent
You often want to save on total expenses by not hiring a real estate agent. But by doing this, you are denying yourself exclusive information about foreclosures and the laws in your state that only these agents know. Also, foreclosure transactions are much more complicated than regular real estate investment transactions. It is not possible to be aware of all the complexities of these time-sensitive procedures without having dealt with similar transactions before.
2. Not conducting a proper home inspection before investing
In most cases, the bank that owns the property will request a home inspection report. But in case it is not, you should get a home inspection report for your own benefit. Up-to-date home inspections are essential as they inform you of any recent alterations or damage to the property. You also need the home inspection to convey the future prospects of the property. In addition to getting a home inspector, you should visit the property with your real estate agent. Otherwise, you could end up investing in a property with low rates of capital appreciation.
3. Failing to get a clear foreclosure title
Not being able to get a clear foreclosure title means there are one or more liens on the property. Technically, it means that there is a legal claim against the property to collect some type of debt. This bond must be settled before you can purchase your property. Without seeking a proper foreclosure title, you risk investing in a property that could be collateral or have unpaid taxes. In such cases, the investment process will stop and you will have to wait until those payments are cleared.
4. Not having an investment strategy
You must have a very clear picture of the type of investment you want to make. Not having a well thought out plan will only send your investment down the drain. Judge your situation and think of the right strategy. If you want to make an absolute profit on the investment, the best thing to do is flip the house and sell it at a higher price. But, if you’re looking for a regular source of income, you’re better off holding on to the property and renting or leasing it.
Buying a foreclosed home without planning for your future is one of the biggest mistakes you can make.