1. Don’t Be Afraid of Foreclosures
Yes, foreclosures can come with more hiccups in the buying process than a standard sale. But they’re also one of the most popular ways of picking up real estate at a great deal. Rates of foreclosed properties are high right now, providing an uncharacteristically wide variety of choices for buyers. Educating yourself on the ins and outs of buying a foreclosure is crucial to making the best decision for your situation.
Buying a home at a fraction of its cost is appealing to everyone including investors, so you need to act fast. But never jump into any foreclosure without knowing absolutely every piece of information you can find about the property. Understand that homes that have been abandoned for prolonged periods of time will most likely have costly renovations to make, so shelling out for a home inspection is almost mandatory. Seek out the Seller’s Property Disclosure Statement, which will give you information on the history of the house. And always remember to make sure that there are no liens against the property that might become a hassle later on.
2. Understand Auction Properties and Weigh the Risks
There are two reasons that properties go to auction: the first is that the owner defaulted on the property taxes, the other is that the house went into foreclosure. The bidding for the home will usually start at what is still owed to the bank on the property. In an absolute auction, the highest bidder automatically wins the property. But if you’re bidding in a reserve auction, you might still be declined the property as the highest bidder if you don’t meet the reserve.
Auctions come with their share of risks–even more than foreclosures. Some properties are off-limits for viewing or home inspection before bidding, leaving you vulnerable to whatever maintenance issues may be lurking behind those walls. Auctions are also usually a cash buying process, which isn’t always an option for a lot of people. But if you are well-informed and have the ability, the reward of auctions can often outweigh the risk involved.
3. Cautiously Search for Bank-Owned REOs
If a house doesn’t sell at auction, it usually becomes property of the bank as an REO (real estate owned) property. You’ll find most REOs are priced at drastically reduced rates. Those low numbers can be very appealing for aspiring homeowners. But don’t automatically assume you just found the deal of a lifetime.
REO properties usually get that way because they were a tough sell. Either their location isn’t desirable or the renovations needed are beyond the scope of what others were prepared to take on. But for the right person with a lot of knowledge on maintenance and repair work, an REO property can be a diamond in the rough.
The perk to REOs is that they can be the safest deals in the market. The bank wants to unload them and might even be willing to take care of any tax liens. In some cases, they’ll even handle repairs that keep getting in the way. As with foreclosures and auctions, educate yourself on the fine print before getting into anything and hire that home inspector!
4. Get in on the Budding Neighborhoods Early
In real estate, it’s all about the L-word: Location. But if you wait until a location becomes the talk of the town, you’ll be paying top dollar real estate prices. To the naked eye, up-and-coming neighborhoods aren’t always easy to see. But there are a few things you can look for.
If you’re searching in a city that is rapidly increasing in population, then look for the neighborhoods that are closest to business centers without the big price tags. As the population increases, those are the neighborhoods where real estate will continue to see a rise. Also, pay attention for trendy businesses moving in, a decrease in crime rates, new development projects popping up, and even areas close to desirable neighborhoods that have outstanding and unique architecture. These are your best bets for an up-and-coming neighborhood where you can get affordable deals and then sit back and watch as your investment grows.
5. Keep Your Eye on Overpriced Listings
It might seem counterproductive to watch houses that have been priced above the going rate. But keep in mind that the underpriced houses see a huge amount of activity and volume and are usually the first to fly off the listings.
The overpriced homes can sit. And sit. And sit some more. Sellers either decide to take the house off the market or they will begin to slash the price. And there’s no harm in making an offer on a house that has been sitting on the market for the past year. You might just come across someone who is willing to sell under what they hoped for to be done with the process.
6. Pay Cash When Possible
Obviously, paying cash for a house is just not an option for most people. But, if you do have the ability to pay for a property outright, then do so. Not only will you forego the financing expenses as well as interest rates, but you will almost definitely be the winning bid.
Cash is such a desirable option for banks and sellers, that it allows buyers the opportunity to underbid and still potentially come out on top.
7. Buy at the End of the Year or End of the Quarter
Like most sales departments, the end of the year or quarter can be the best time to strike. This is when banks are rushing to get their numbers in and get their listings off the books. So, although there are no guarantees to this strategy, it never hurts to try buying towards the end of a month, quarter, or year. This strategy can work particularly well for cash buyers.
8. Be Patient
It sounds trite, but it’s true. Patience will be your best friend while trying to get the best deal you can. When you go non-traditional routes for sales, you’ll quickly learn that things will almost never go completely smoothly. But the best thing you can do is to be well-prepared and ride it out and wait for the next wave. If the deal that you wanted didn’t go through, don’t worry. There will be another. And if you’re running into roadblock after roadblock with a deal, then just take a deep breath and feel confident in your research to get you through.
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