Choosing to invest in foreclosed property can be a brilliant and lucrative decision. If you’re looking for alternative investments, buying a property at less than 50 percent of its market value could be your best investment yet.
However, there are a few things you should keep in mind before investing in foreclosed properties. So, keep reading to find out which four factors matter the most when it comes to these types of real estate purchases.
1. Repairs and Renovations
Buying a foreclosure property can be an attractive option for any investor or homebuyer. You can score a good deal on the house in disrepair, but you’ll need to budget for repairs.
When looking at foreclosures, consider the potential repair costs in your budget. Typically, foreclosure properties are sold “as is.” This means that if you find significant problems with the house — such as mold, asbestos, or lead paint — you have no recourse but to deal with it yourself. Try to mitigate this risk by only bidding up to a purchase price that allows you a healthy budget to address any issues.
2. Hire Experts
Use your team of professionals to analyze the property. Your lawyer and trusted inspector are especially critical because they can identify significant problems that could end up costing thousands of dollars to fix. Your lender will also require an inspection before approving the loan.
Ensure that your team includes someone who has experience evaluating properties like yours. This person can help you get the best value for your dollar by identifying which repairs to prioritize and which ones might be best left for another day.
3. Check Property Taxes
One of the main reasons for the foreclosure is that a homeowner could not make their mortgage payment. The failure to keep up with their payments could mean unpaid bills, such as utilities and taxes. In some cases, the new owner is liable for those bills, and you will have to pay them if you decide to buy the property.
Not only that, but the cost of repairs on a foreclosed home can be high due to deferred maintenance. If a home has been sitting vacant for a while, it may need a lot of work, including plumbing and electrical work. In some cases, you could be required to pay back taxes on the property as well.
4. You Are Only Guaranteed to Get the Building
If you are looking at a foreclosure because you want a good deal, then you need to know that you might not be getting a good deal at all. Foreclosures are generally sold as-is and with no guarantees, and they can be in disrepair and sometimes be stripped bare of everything—even fixtures like sinks. So, when you see an exceptionally cheap home that has been foreclosed on, take note of how bare it is—there may be a reason!
Before investing in a foreclosed property, consider the other relevant factors that might impact your decision. Keep in mind that, for many of these factors, you may not be able to get a clear picture until you begin the process of inspecting and developing the site.
Don’t let the acquisition price be the sole determining factor in your decision. With any investment, make sure you understand all relevant risk factors and assess their combined relative importance to you before moving forward with a particular project. At Cobb Cole Attorneys at Law, our team of expert real estate attorneys is here to help you on your journey to purchasing foreclosed properties in St. Augustine. Contact us today to schedule a consultation.