Tips for Choosing Foreclosed Homes for Sale

by Allia Vidmer on January 28, 2010

Buying foreclosed homes for sale is often recommended as a quick way to flip properties and make money. In reality there is a lot of skill in knowing what types of homes can be turned over quickly and also what types of properties are the best investment for a home for you and your family. Without knowing a bit about how to buy these types of homes, you may not actually be getting the best possible price or the best possible investment for your dollar.

The first thing that is important is to know if you are looking for a home for yourself or a property as an investment or rental property. If you are looking for your own home, make a list of the features you must have, the features you know you don’t want and what is ultimately optional. Any features that are must haves that aren’t in the property or any features you don’t want that are there should both be deal breakers. Saving a bit of money but finding a home that isn’t all you want is never a good deal in the long run. Of course, if you don’t have a strong preference either way you will have an easier time finding a home.

Consider the price of foreclosed homes for sale in relation to other homes in the neighborhood. Comparable prices are available online in some states, but not in all. In addition, if there are several homes in foreclosure in the neighborhood, the value of all homes in the area drops even those that are not in foreclosure. This needs to be factored in when you place your bid or when you make your offer. While the price of the home is a major factor, remember there are other costs as well. Closing costs, property taxes, HOA fees and home insurance all need to be calculated to ensure you can afford to continue to live in the home after the purchase is made. If you are planning on using the home as a rental property you will also have to assess the price you can reasonably expect for rent in relation to the mortgage and ongoing expenses.

Location is critical for both rental properties and homes you want to live in. Foreclosed homes are not always in the best locations, which may mean you get a great deal but also limits your resale or rental options. The proximity to schools and shopping is important, but so is access to major roads and parks. Depending on the area in which the home is located, flood plains, predominant wind direction, snow removal routes and even rainwater runoff can all be a positive or negative with regards to the overall location of the property.

Once you have considered the home’s features, checked your budget and got to know a bit about the neighborhood, the next step is to have the home inspected. Don’t assume that all foreclosed homes for sale will be in good condition just because they are being sold by a bank or lender. If the inspection detects problems, be prepared to negotiate the cost of those repairs into the price you are willing to pay for the property.

Finding foreclosed homes for sale is a great way to get a bit more house for your budget. Just be sure to check out all the aspects of the purchase from both an investment and a resale potential perspective. If you do you will be able to find the home of your dreams or investment property that you will enjoy for years to come at a fraction of the typical market price.

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