Good deals await Anacostia investors when they consider buying foreclosure properties. But, the procedure of purchasing a foreclosure can be a bit tricky to navigate, especially if you haven’t done it before. Don’t be discouraged. Keep reading for tips on how to successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal – so, you can add foreclosure properties to your next investment property search.
It’s important to note the difference between a traditional listing and a foreclosure. While traditional listings are typically homeowners or investors selling individual properties, foreclosures are properties that have been reclaimed by the lender or bank for nonpayment of the mortgage. It’s not uncommon for lenders to try and recoup as much of the outstanding mortgage of the foreclosed property. They do this by putting it up for sale, often at a price below market value.
When you’re ready to initiate a search for foreclosed properties, begin by hiring a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market and they can give you tips and advice regarding investments in foreclosed properties. Look for agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These designations mean that the agent has completed additional training in foreclosure property deals.
Getting the right real estate agent is but the first step; the next one would be to have your financing lined up and ready to go. Foreclosure deals can move very quickly, so best to put yourself in a position where you can make informed decisions at a moment’s notice. The most successful foreclosure buyers provide preapproval letters and other documents to the bank or lender in an attempt to demonstrate their ability to close the deal quickly. Banks will want to profit off of valuable property as soon as possible. But, they will want to sell it for as much as they can, as much as possible. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Regardless of how swift the dealings may be, don’t forget to do your due diligence. Run your numbers and locate comparable properties in the area before making any offers. In very competitive markets, you might need to offer a bit more than the initial asking price to appeal to the bank or lender. Hence, this higher price should be included in your calculations.
Throughout the procedure, pay close attention to potential red flags. Case in point: hidden liens on the property. This is not something you want to find hidden under a deal. It’s not a foolish assumption to think that the previous owners failed to pay some or all of their other debts since they stopped paying their mortgage. Unpaid property taxes and other debts can result in liens against the property that will need to be paid before the title can be transferred into your name. Another big red flag is serious repair issues or missing things.
Although a few cosmetic issues are to be expected in a foreclosed property, some have seriously neglected or even intentionally damaged the property before they are forced out by a foreclosure. Angry owners and tenants have been known to strip the house of anything of value, including copper pipes, fixtures, doorknobs, and even cabinets. Check through the property and make sure that you don’t end up spending more on repairs than you do on the actual property.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. However, with a team of competent property investment managers, it’s easier to find a bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Anacostia, make sure you have the right team managing your investment property. If you are interested in learning more about Real Property Management Washington DC or have additional questions, please contact us online or by phone at 202-813-9993 today.
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