Foreclosed properties are attractive for 1 main reason: they are comparatively cheaper than a traditional home. That said, foreclosure homes do come with a caviat: you must buy them as-is. It is for this reason that you must always weigh the cost of purchase against the cost of repair. Even if you’re planning to fix and flip the property, realize that you’re still going to have to put capital into it first. The question, then, is: how much capital can you afford to invest in order to make a profit?
Perhaps you’re not interested in a fix and flip arrangement. Perhaps you’re looking to own the property long-term instead. Well, whether your goal is to fix and flip, rent it out, or make it your primary home, follow these 3 tips to ensure that you get the best home for your buck!
Get a Real Estate Agent That Specializes in Foreclosures
Like lawyers, real estate agents tend to specialize in certain markets. For example, some focus on commercial properties, and some focus on foreclosed properties. Agents who specialize in the foreclosure space know what to look for, and how to handle negotiations with the bank. Truly, these agents will be able to steer you away from properties that don’t fit your investment goals.
Now you might be wondering:
How do I find one of these agents? What qualifications should I even look for? Ideally, you should look for real estate agents who are Certified Distressed Property Experts (CDPE). Agents who hold this certification passed training courses specifically geared toward the foreclosure markets.
Get Funding & a Preapproval Letter
Unless you’re going to pay cash, the bank requires proof that you have the funds to back any offers you make on the property. While there are a few ways to get funds, we highly recommend working with a private money lender like Sachem Lending. Unlike traditional banks, private lenders can secure funds quickly; and since foreclosure properties tend to sell fast, it’s crucial to have guaranteed capital available to you.
Run a Comparative Market Analysis
Once you have your pre approved letter, you’ll need to decide how much you’re willing to pay for your foreclosure property. Since you’re buying it “as is,” you want to make sure that you’re getting the best deal possible. To do that, run a comparative market analysis with your agent. This is the art of studying recent purchase prices of properties with similar attributes in the area.