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Sunday, March 24, 2013

Should you buy a foreclosed home?

by Chris Obenschain

Interest rates are low, foreclosed properties are plentiful, and it's a buyer's market -- so, should you buy a foreclosed home? You've got to know what you're doing and pick the right house if you don't want to lose to your shirt (and your savings). Whether you want to fix up and flip the house or are just looking for a bargain-priced place to hang your hat, here's what you need to know.

The first and arguably most important issue to consider when looking for a bargain-basement buy on a foreclosed home is the property's condition. Most residents of foreclosed homes are none too happy about their eviction, and many physically take out their discontent on the house itself. Missing plumbing, holes in walls and broken appliances are all common, and as many as half of all foreclosed properties have major damages from a former owner. Even if there's no intentional damage, foreclosing on a home is a lengthy process -- often taking a year or longer -- so it's pretty much guaranteed that the property hasn't been properly kept up for at least 12 months. Many foreclosed homes have serious issues like cracked foundations or leaky roofs that can be quite costly to repair.

Because you're not the only bargain hunter out there, you're going to have to move fast to secure a property, leaving little time for a proper home inspection. In fact, many people buy foreclosed homes at auctions, sight unseen. That's a risky gamble for a company or a wealthy investor, but it can be disastrous for someone who's hoping to make a quick profit by flipping the house or for budget-minded home shoppers.

Say you find the perfect foreclosed property -- you need to come up with a way to pay for it all. Even if you've got a good job and a great credit score, financing a foreclosed home can be extremely difficult. Many houses bought at auctions have to be paid for in full within 24 hours. You might be able to get financing for a loan under normal circumstances, but it's tough to come up with that kind of cash on such short notice.

Now, this only applies to those looking to flip the property, but you need to realize your great fixer-upper could take a while to sell. Home sales aren't exactly breaking records right now (at least, not in a good way), so even if you find a house at a great price and fixing it up is as cost-effective as you could hope for it to be, it could sit on the market for months, maybe even for a year or two. During this time, you'll be the one paying for utilities, taxes and insurance, all of which will severely cut into your profit margin.

What's the verdict? Buying a foreclosed home can be risky, and you might be better off buying a house without all the troubled history. It's a buyer's market for those too, you know.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you.  Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest.  Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.

It seems that the dream of past generations was to pay off a mortgage. The dream of today's young families is to get one.  I would love to hear from you, about your Real Estate Dreams and questions.
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