A lot of Oak Brook investors are considering buying foreclosure properties due to the fact that they can often be a good deal! Be warned, though, that the proceedings of purchasing a foreclosure can be a bit tricky to navigate, more so when it’s your first time. We do have, however, a few insights into how to successfully buy a foreclosure property – and how to spot warning signs telling you to walk away from a deal – so, you can add foreclosure properties to your next investment property search.
It’s important to note the difference between a traditional listing and a foreclosure. While traditional listings are typically homeowners or investors selling individual properties, foreclosures are properties that have been reclaimed by the lender or bank for nonpayment of the mortgage. The lender will attempt to recoup as much of the outstanding mortgage as they can by selling the property, often at a price below market value. This happens once the property has been foreclosed on.
When you’re ready to initiate a search for foreclosed properties, begin by hiring a real estate agent who specializes in foreclosures. These real estate professionals have an in-depth knowledge of the process and the local market. So, make sure to heed their counsel before rushing to any decision. Look for agents with certifications like Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosure Resource (SFR). These designations mean that the agent has completed additional training in foreclosure property deals.
Remember that you should have your financing lined up and ready to go before you move forward with any decision with the right real estate agent. Foreclosure deals can move very quickly, so best to put yourself in a position where you can make informed decisions at a moment’s notice. The most successful foreclosure buyers provide preapproval letters and other documents to the bank or lender in an attempt to demonstrate their ability to close the deal quickly. Banks will want to profit off of valuable property as soon as possible. Nonetheless, they will do what they have to in order to gain as much from it as possible. It is a unique balance and one of the reasons why buying foreclosures can be a far more nuanced process than traditional home sales.
Regardless of how swift the dealings may be, don’t forget to do your due diligence. Run your numbers and locate comparable properties in the area before making any offers. In very competitive markets, you might need to offer a bit more than the initial asking price to appeal to the bank or lender. Hence, this higher price should be included in your calculations.
Throughout the procedure, pay close attention to potential red flags. As an example, make sure you don’t fall into the trap of hidden liens on the property. It’s not a foolish assumption to think that the previous owners failed to pay some or all of their other debts since they stopped paying their mortgage. Unpaid property taxes and other debts can result in liens against the property that will need to be paid before the title can be transferred into your name. Another big red flag is serious repair issues or missing things.
It is to be assumed that a foreclosed property will have some cosmetic issues. However, there are tenants that have seriously neglected or even intentionally damaged the property before they are forced out by a foreclosure. Angry owners and tenants have been known to strip the house of anything of value, including copper pipes, fixtures, doorknobs, and even cabinets. Make it a point to examine the actual value of the property and how much it will cost to cover the repairs. You don’t want to end up paying more than what you bargained for.
Buying foreclosed properties is a decision each investor will need to make on a case-by-case basis. Now that you’re ready to take risks in investment, make sure you team up with people who will help you accomplish the goal of finding a bargain property that will pay out for many years to come.
Whether you decide to purchase a foreclosed home or a traditional listing in Oak Brook, make sure you have the right team managing your investment property. Feel free to contact us online or by phone at 630-427-2200. Real Property Management DuPage Preferred will be glad to answer any of your questions.
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