10 Tips for
Investing in Distressed or Foreclosed Properties
by: Elaine Voncannon
1. Search on the world wide web for distressed or
foreclosed properties as a starting point. Use a
professional REALTOR to identify great foreclosure
deals for you. You may be successful at searching
the web on your own, but keep in mind some of the
information is outdated, some may be incorrect, and
some of the available properties are not even
listed. A REALTOR subscribes to updated MLS listings
and can offer you the most current information
available.
2. If you search yourself for distressed
properties and purchase from the selling agent, you
are paying a commission to someone with a vested
interest. Obtain objectivity in the sale by working
with your own REALTOR. You won’t pay any more.
Technically, everyone works for the seller, since
they pay the commission.
3. With distressed or foreclosed properties, time
is of the essence. Purchasers must close on the date
specified by the agency, and cannot close after this
without penalties of $25-200 per day.
4. It takes 1-3 weeks to qualify a loan. If you
are approved for a loan, make sure you are qualified
by your lender as soon as possible. If you are
paying by cash, make certain funds are available. If
finances are in order, the REALTOR will then submit
an offer. When the offer is accepted by both seller
and buyer, the REALTOR will submit the ratified
contract to the lender and closing agent. These
steps will begin the process of a successful real
estate transaction.
5. When purchasing a distressed property, always
obtain 3-4 bids from different contractors to
estimate costs of repairs, if you do not plan on
doing the work yourself.
6. If you are going to sell the property after
rehabilitating it, ask your REALTOR to research
similar properties in the neighborhood to ascertain
market price.
7. Keep copious records for tax deductions. Any
expenses related to the purchase, repair, or
maintenance of the property may qualify. Meticulous
records are key to a profitable real estate venture.
8. The title you receive after purchasing a
distressed or foreclosed property is a special
warranty deed rather than a general warranty deed.
Some buyers are alarmed by this, but there is no
need to worry. The purchase of title insurance
protects the buyer. Each lender purchases insurance
to protect the loan as well. Titling insurance
should be obtained by the property purchaser. It is
always offered by the closing agent. Consider using
an attorney instead of a titling company as your
closing agent. An attorney is only $50-75 more than
a titling company. A real estate attorney can remedy
any situation that may arise. Therefore, they are
more efficient representatives on time sensitive
foreclosure properties. 9. Foreclosure properties
require special addendums and special contracts by
the individual bank and HUD office (where
applicable).
10. Foreclosure properties are potentially the
most profitable, but require the most attention to
detail. A REALTOR experienced in foreclosure deals
is highly desirable because the paperwork must be in
order to submit a proper bid, and timeliness is
critical. |
