Top Tips to Keep in Mind while Investing in a Foreclosure

It’s not a first to find that someone who has bought a home is not able to pay his debt and is forced by the lender to sell off the asset kept as collateral / security (which is usually the home). This is the prime reason why foreclosure auctions exist.

It’s important, while attending the auction, that you know well how much you are willing to buy the property for, how much it is selling for and what its market value is.

There are a number of elements to foreclosures you should explore before investing and also a number of tips you should bear in mind before the actual investment and also during the foreclosure auction.

1.    Do your Homework

It is a good habit to do your homework. Finding out in advance which properties will be in foreclosure or those that are already in foreclosure and doing your research on them will allow you to make the right deal.

Contact an agent and have him update you about foreclosed properties in the neighborhood or in an area you would like to invest in. Agents usually keep a hawk’s eye out for these types of real estate investment opportunities.

1.    Pricing the Property

Depending on the reason for buying the property, you need to assess how much you would want to pay for it. You also need to do a little research into how much the houses in the area are generally sold for so that you know its market value.

 2.    Come Prepared

At auctions, you are required to pay a certain amount or the entire amount in cash on the same day as the auction if you are the winning bidder. So if you intend on buying a property for sure, it is important that you contact the auctioneer / owner and find out how much cash you need to carry with you.

3.    Factor Probable Repair Expenses

Foreclosure buying mostly does not allow prospective buyers to inspect the property or even enter the house. It takes buying ‘as it is’ to a literal level. However, you may request the financial institution to allow an inspection and they might just let you do so since you are interested in buying.

But just in case they don’t, you will need to assume a cost for internal significant damage, especially if the home owner failed to make payments or if the home has been sitting empty.

Bring a veteran rehab contractor with you to assess the damages at an open house auction.

4.    Bidding

Bidding is not a talent you are born with. Make it a point to attend a couple of auctions just to get the feel of bidding and watch and learn how bidders use timing and patience. Also, keep an eye on bidders who are frequent at auctions in the area, they will be your competition. After you get a feel of the process, you may participate.

5.    Timing During the Auction

Don’t fuel the fire. When bidders begin calling out their bids, wait until the fury has died down to state your bid or you might just get carried away with the bidding war.

While foreclosures are not rocket science, you need to know your real estate science well before jumping into foreclosure investing.