Daily Real Estate News | June 19, 2008
Avoid Pitfalls When Buying Foreclosures
Buying a foreclosed home is no cakewalk. It can be a sure-fire way to lose money for a purchaser who isn't knowledgeable and careful.
Here are some prime considerations for anyone wading into the foreclosure market.
- Avoid outstanding liens. Make sure the property has a clean title. Any outstanding liens and fees incurred by the original owner will be transferred to the new buyer.
- Bid conservatively. The market in many places is still depreciating. That unknown added to transaction, repair, and marketing costs could sour the deal.
- Beware foreclosure concentration. Prices in neighborhoods where there are lots of foreclosures have declined the most - and prices in these areas are still declining. A buyer should confirm that there's an opportunity to make money if prices fall another 15 percent.
- Beware the appraisal. If the price is discounted from an appraisal done before August 2007, it is almost certainly unrealistically high.
- Cash is king. Even a buyer with a renter lined up and enough money for a 20 percent down payment needs still more cash to weather another two or three years of a depressed market before unloading the property.
Source: Forbes, Matt Woolsey (08/19/08)