5 Things To Know Before Buying a Foreclosed Home

By Rick Merlini

Certified Professional Master Builder

Professional Real Estate Sales Trainer

2 Time Builder for ABC Extreme Makeover Home Edition

Record Holder for having built a 3900 Square Foot home in 53Hours and 54 Minutes

Buying a foreclosed home is a good way to either make money or gain immediate equity in a home for many people. For most people, their home holds the majority of their available money that they would have to invest. This is why you should always have your money working for you. You always make money if you buy something low and sell it high. That’s why buying a foreclosed home could be a moneymaker.

If you are just getting started, you need to learn all the possible pitfalls that come along with buying a foreclosed home. Here are five things that you should keep in mind before you get started.

1. When you find a home that you think you may be interested in, go and look at the neighborhood before going any further. The real estate slogan ‘location, location, location’ holds just as true for purchasing any type of home. The house may be beautiful, may be grand, but be sure to look at the other houses in the neighborhood. If they are in decline or are in poor condition, your house will be more difficult to sell. An old Golden rule, “You want to be a Chevy in a Cadillac neighborhood” Why? Either your neighbors will bring your home value up OR they can bring them down. Unless the neighborhood has some special purpose or meaning to you that brings other value to the table, look for homes that are on the lower level of the average cost in the neighborhood.

2.  Check to see how close schools are to the neighborhood your house is in. Does the school have a good reputation? Other amenities to consider are shopping, parks, and possible neighborhood upgrades. Is shopping close by? Is there a neighborhood park for the kids? Is the city going to revitalize this area of the city? All of these issues will have an impact on how quickly you can sell the house and for how much. All of the points mentioned above will either bring value to the home or take value away.

3.  Homes that need many repairs are the best opportunities to either make a lot of money or lose a lot of money. Why?

a. These homes are priced better because fewer people want to deal with all the work that it will take to repair them.

b. Most people have a hard time imagining what it will look like when it is completed. The fewer people that the home appeals too, the more difficult it is to sell. Therefore, they lower the price to try to attract more buyers.

c. When you have purchased the home correctly and have done the repairs properly, you will end up with a home that is freshly remodeled to your taste at below market value. The most important things to know in purchasing these types of homes is to make sure you know ALL the costs that you will incur BEFORE you make any offer. Secondly, make sure that the contactor that gave you all the costs is the right contractor for the job.

4. When you are about to make an offer to the bank on a foreclosed property, it is important to show the bank you that you are serious and you are in a financial position to go through with your offer. Remember the Assets Managers who manage these properties manage many others as well. Therefore, when an offer comes in to the Asset Manager and the offer comes with a pre-approval and a good amount of earnest money, they are more likely to look at your offer in a more favorable light.

5.  The best deals seem to come in two different situations.

1. Get the listing when it first hits the market. Sometimes a realtor makes a mistake or the Asset Manager just wants a house off its books. Either way, it is priced right. You must be ready to act on it and you need to be at the right place at the right time because these homes do not stay on the market long.

2. The second senerio takes a little more work and a little less luck. You often see those homes that have been on the market for more than 3 or 4 months. A home that has been on the market that long is obvious overpriced for what it is. The Asset Manager is tired of managing them and their boss is probably on their back to move them. In this case, there is a play to make them a low-ball offer with a quick closing. It does not work all the time but it dose work often enough to track those homes.

Now that you know a few things about foreclosures, you need to find the Right Realtor and the Right Contractor. In Southeastern Michigan, there is a new company that I think is perfect for purchasing foreclosed homes. Foreclosuremadeez.com is a company that will find you the foreclosures and, before you make an offer, they will bring in their sister company, Propertrestorationllc.com, to conduct an inspection on the house and talk with you about any repairs or other possible home improvements you may want. This way, BEFORE you make an offer, you will know your costs for the house. Knowing these costs to improve upfront will insure that you are making the right offer for you and your family.

For more information, visit http://www.foreclosuremadeez.com.

You must start your search by acknowledging these few basic facts.

1. It is not going to be easy and it will take a lot work and research. In very rare instances will you be able to find that perfect home that fits you and your family. It may take you hours of careful research and planning to locate a foreclosure home that fits your budget and your family’s needs. If it were easy, everyone would be doing it.

2. Do not expect to find a home that you are just going to move into right away. Remember the last person to own this home may have been forced to leave and probably did not do so willingly.

3. You are only as good as the people you have helping you. You will not be able to do it without help from a GOOD foreclosure specialist and a GOOD contractor.

4. When it is done right, you will end up with a home that is worth more than what you paid for it, no matter what state the economy is in, and it should be remodeled to your personal taste.

Now, once you are willing to except the facts above, you are now ready to start your search. When you start, keep these recommendation in mind.

1. Get Pre-Qualified: Securing financing early in the process is important because it will ensure that you are qualified to purchase the home. Being pre-qualified will also give you greater bargaining power when the time comes to make an offer. Find a lender that has worked with a number of foreclosures and understands the foreclosure process in depth. Taking the time to find the right lender will save you a lot of frustration and may save you from missing a good deal.

2. Know the Process: Knowing about the foreclosure buying process is an important part of purchasing such a property. You can buy a foreclosed property at auction, by working directly with the seller of the property, or even by working with a real estate firm that specializes in these types of homes. Companies like Foreclosuremadeez.com can really help you through the process.

3. Research the Area: Once you indentify the properties you may be interested in, your research is not finished. You will need to start looking into the benefits of the surrounding neighborhood, the availability of public and private schools, the population of the area, average property values, the rate of property value growth in the area, and the availability of career and recreational opportunities. The foreclosure expert at foreclosuremadeez.com can help you with all of this information.

4. View the Properties: See the neighborhood, get a feel for the house and see through the mess. THE KEY TO GETTING A GREAT DEAL IS THE ABILITY TO SEE WHAT THIS HOUSE CAN BE, NOT WHAT IT IS TODAY!

5. Bring in the Right Contractor: You need help now. Bring in a good contractor to walk the home with you to find all the repairs you will need to make and talk with him about the possible changes you may want to make. Once that is done, have him give you a firm cost to make all the necessary improvements. REMEMBER, if it is a good deal, time is of the essence. A Good contractor that I know of is Propertyrestorationllc.com. They will do the inspection for you and get you a firm cost within 24 hours

6. Make an Offer that Works for You: Now that you have your financing in place, you have found the right home, have all the cost of repairs for the house, You are now ready to make the right offer that fits you and your family. And once accepted, you are on your way to a home that is totally remodeled your way at a great price. ForeclosureMadeEZ.com and PropertyRestorationLLC.com can help you find and get that great deal. Together, they are here to take the risk out of buying a foreclosure and make it EZ so you get a great deal.

First off, buying an existing home instead of building a new one will decrease the demand on material like trees and other natural products that it takes to build a  new home.

Secondly, most foreclosure that I have seen are in need of repairs. Because there are in need of those repairs is why they are price so well. When you purchase a foreclosure and start making those repairs, you can turn the home into a home that is greener than what is was. All you have to do is when remodeling the home , make sure you use material and products that are Green Friendly.

Here are 10 Ideas to thinks about when converting you foreclosed home into a Green Home.

1. Lower utility and water bills. Having energy-efficient appliances in the kitchen and media room can reduce monthly utility bills. Tankless water heaters mean less time and water wasted waiting for water to warm up in the sink or shower.

2. Healthier indoor air quality. Green-certified homes offer reduced exposure to mold, mildew and other indoor toxins. This is especially beneficial to sufferers of asthma and bronchial disorders.

3. Tax benefits. DSIRE is a database of state incentives for renewable energy and energy efficiency. Through the Energy Policy Act of 2005, the U.S. government offers several tax breaks and incentives for efficiency upgrades to homes. The Department of Energy offers federal tax incentives. The USGBC lists local tax breaks. The Environmental Protection Agency (EPA) also offers sources for green funding, as does the Energy Star program.

4. Higher real estate resale value. According to an article in Business Wire, on the one-year anniversary of the Northwest Multiple Listing Service’s addition of green-design search features to its property listings database, analysis shows that new and existing green-certified homes in King County sell in up to 18 percent less time and for 28 to 37 percent higher value per square foot.

5. Improved durability and less maintenance. Certain green building materials, such as bamboo floors, are easy to clean or require less maintenance than traditional carpet flooring.

6. Reduced waste sent to landfills. Modular homes are built in factories that recycle the waste generated during the construction process and leave less waste at the construction site. Many green homes often use recycled building materials.

7. Enhance and protect biodiversity and eco-systems. Using xeriscaping and native landscaping reduces needed irrigation.

8. Conserve and restore natural resources. Harvesting gray water saves on water bills. Composting saves money ordinarily spent on fertilizer and sends less waste to landfills. Alternative energy sources means a home neither contributes to rolling blackouts nor is it as badly affected by them.

9. Better for the environment. In the U.S., homes are responsible for 21 percent of the country’s greenhouse gas emissions, according to the USGBC. Living in a green home means that you are helping reduce the causes of climate change. Using local materials means less fuel is used when shipping exotic materials from other countries and ensures fair trade and labor issues.

10. Optimize life cycle of a home. The greenest homes are sustainable, meaning they are built to last and work effectively for generations.

Some say to stay out of the real estate market because it is too volatile. Some say it is the perfect time to start buying foreclosures. After all, properties that are foreclosures are often times sold by banks for a fraction of their full value. With the real estate market somewhere near its probable bottom, this is a good time to stock up on investment properties at a cut rate.

It is enough to get a would-be real estate tycoon excited. And it does! Encouraged by those who advocate foreclosure purchases (and who are often selling guides or putting on seminars to teach you how), many novice players in the real estate field are gambling on bank-owned homes.

Is buying a foreclosure a good idea?

In some cases, it probably is a good idea to buy homes that are foreclosures. There are some great bargains out there. There are also some dogs with those great deals. Just because they are foreclosures does not mean they are a great deal. What can make a foreclosure such as great deal is that, if you purchase the right property, it could turn into high-margin moneymakers for you within a year or two.

Those success stories, however, are tempered with some very disturbing tales of purchases that were disastrous. Buying a foreclosed home comes with a special set of risks and may not be an appropriate investment for those with little or no experience in the field.

Maintenance nightmares

There is the question of upkeep, of course. This is a serious issue with foreclosure properties on multiple levels. First, by the very nature of the situation, you are dealing with a property that was maintained by someone who was unable to make mortgage payments. It is not a stretch to imagine that maintenance concerns fell by the wayside when the owner was not able to make his or her payments.

Second, the banks that hold foreclosed property do not have that old “pride in ownership” thing working for them. Banks are property managers and they often allow foreclosure properties to slip in terms of care and maintenance. By the time a home is “up to snuff” it may no longer be a bargain.

The ugly economy that has contributed to the rash of foreclosures we have seen adds another risk to the purchase process. Many homes are partially, (or completely), gutted by owners during the foreclosure process in order to raise money.

There are homes in which floors have been completely removed, cabinets have been torn from the walls, and even kitchen sinks have been yanked out and sold. These owner-gutted properties often do not turn out to be a great bargain after the new owners handle necessary renovation and repair.

Foreclosed homes are generally sold “as is”, meaning that the buyer assumes a great deal of risk in the transaction. An example of this is the story of a couple who bought a foreclosure only to discover that it had a serious mold problem. A lawsuit ensued, and this foray into foreclosure-land failed to turn into a profitable investment.

Look before you leap

What makes buying a foreclosure so difficult is the fact that you first need:

1. An Expert in the Real Estate field to find them.
2. An Expert in the Building Industry to tell you what wrong with them.
3. An Expert in the Mortgage Industry to get you the money, which in these times is very hard.
4. An Expert you can trust to advise you on whether it is right for you.

Foreclosuremadeez.com is only company I know of, that is working out of Southeastern Michigan, that has been smart enough to put all 4 Experts you need together to make this process easier. Foreclosure Made EZ recognized the problem the consumer has been facing and solved the problem.

In closing, my advice to you as a prospective buyer of a foreclosure is:

“Do your research and where you feel that you may need help, go out and get the best help possible!” Remember, you do not need to know everything; you just need to be smart enough to hire someone that does!