In the last 5 years, millions of people in North America have had their houses foreclosed upon. Financially and psychologically these foreclosures have been devastating – not only to the people who lost their homes, but also to entire neighborhoods and cities left with these vacant and unsellable properties.
With the economy starting to turn around, many of these foreclosed properties are now being snapped up by investors and people returning to the real estate market. So is buying one a good idea?
It’s a yes/no answer to this one I’m afraid. Sometimes there can be good deals found, but regardless, it can be a lengthy and challenging process and not one I’d advise anyone tackle lightly.
Buying a foreclosure property can involve court challenges, more bank involvement than anyone could ever enjoy and potentially try the patience of any buyer. But if you are still game, here are some things to consider:
1. Location
Is the property in an area where prices have continued to climb and is “up and coming”? Or have many homes in the area been forced into foreclosure by being priced too high initially? Has that made the neighbourhood less desirable? Was the property an exception in an otherwise decent area? Will there be future potential for attracting buyers back to the area and/or your investment?
2. Is the quality up to scratch?
Will the property require more investment capital that cancels out any initial affordability? When money gets tight, people stop doing regular maintenance on their houses – and that is assuming the previous owners did any maintenance to start with. Just because the price looks attractive doesn’t mean you’re getting a good deal.
3. Price
This is not the most important aspect to consider – it might be what attracts your attention initially, but it shouldn’t be the basis of a decision. The money you may need to invest to make the property livable, or to sell it on, could be considerable. And paying all the legal fees involved in buying a foreclosure property will not be a cheap exercise. It isn’t a simple process, so you’re unlikely to be able to make a rash decision, but it’s important to take the time to examine the pros and cons of the price, after other factors.
4. Listen to the advice of your real estate agent
As usual, we’re the experts. We’ve got the team connections to lawyers, lenders and surveyors to be able to access the potential benefits or pitfalls of taking on a foreclosure property. If it’s definitely a route you want to go down, your agent will be the one to make it happen.
Buying a home that has been taken away from someone else might not be the kindest part of the real estate world – but it is how the world works. If approached passionately, buying a foreclosure could be worth an investment of your time and money.
Equally, use your business head to be prepared to walk away when a deal looks to be getting out of control. If the quality isn’t up to scratch, or the location is on a downward spiral, or fees and bank negotiations are on an upward spiral, it may be time to move on. The market is tough, and you’ve got to be tough with it.
