Time is money. Your time has a cost. Include the cost of time and your services in your cost structure especially if you are going to fix the foreclosure home.
Never buy a foreclosure fixer-upper property if it is not at least 20 percent lower than comparables. This figure should be much higher in a declining market. And you must think of an exit strategy…how do you get out of this property.
Check the volume of property transactions. Stay away from slow-moving areas. Selling your foreclosure property quickly is very important.
If your fixing up a property be sure that the value is going to improve based on your time and materials investment. Don’t overinvest, especially in a standard home.
Consider the selling commission (up to 6 percent of the new value of the property) if you are not going to sell it yourself.
If you can’t sell the property and need to rent it out for awhile will the rental income cover your mortgage payments? It’s best to know this before you purchase.
Make sure you’re not caught up in the lure of a foreclosure property. It must be a very good deal or pass on it. Don’t buy just to buy.
Condition of foreclosure property
Do not rely on anybody’s word. Nothing can replace a thorough inspection by a professional if it is allowed.
Be extra careful that most foreclosure properties are sold on “as is” basis.
Once you accept the “as is” offer, you cannot claim any compensation for defects and damages.
Lenders and others selling their properties “as is” are under no obligation to disclose the problems and defects.
Want to make more profits? Buy the worst property in the best location.
Foreclosure homes that you should avoid
Consider not buying if the foreclosure property suffers from the following:
Cracked/uneven foundation (structural) problems
Located on a unstable (earthquake-prone) surface or landslide zone
Asbestos, radon gas, oil, and lead contamination problems
Building code violations
Serious pest (termite) damage
Serious drainage problems
Roof structure that cannot support a new roof (roof truss damage)
Neighborhood is deteriorating
Illegal additions (rooms, garage) or conversions done without obtaining a permit from local authorities.
In addition to such physical properties listed above, try to stay away from foreclosures that are not standard:
Lack of bedrooms and bathrooms that are standard in that neighborhood. Any home that has less than three bedrooms and two bathrooms needs serious consideration.
Deteriorating neighborhood or region. Check crime statistics, location of prisons, or a facility that may adversely affect the air quality or traffic.
