Pro’s and Con’s of a Fixer Upper or Foreclosure
Foreclosures are properties that are owned by the lender, who is holding the mortgage note because the homeowner couldn’t pay it. The lender then tries to sell the home and earn back the amount still owing on the mortgage. There’s usually a lot of paperwork involved, and sometimes a loss for the bank. A bank is in the business of selling money, not houses. Their goal is to get their money as quickly as possible from the highest bidder on the house, so they can start the process again by loaning out their money and earning interest on the loan.
These types of properties are always an option and always available. Just decide if you have the temperament to deal with what comes with a fixer upper or a foreclosure. If you aren’t handy around your home or apartment, be very careful with fixer uppers. Also, if a house went into foreclosure, it was probably because the owners didn’t have the money to properly care and maintain it. Perhaps the utilities were turned off, causing damage, such as mold. In addition, the chances of you getting a sellers’ disclosure that tells you all that is wrong and right with the house is slim. The key is to not get caught up with wanting to purchase a home simply because it’s a foreclosure and you’ve heard that foreclosures are bargains.
Mistake # 35: Underestimating the cost of repairs
When you’re inspecting these types of homes, be sure to have a sense of how much it will take to fix the property. Our experience with contractors has always been that you’ll get a quote, but by the time they finish the job it’s always over budget. This is especially true if you don’t know what you don’t know, or rather, if you lack knowledge. Also, contractors and tradesmen can be unreliable. They commit to the job and then don’t show up, often because of scheduling changes on their end. Ask your real estate agent to assist you with finding reputable contractors or subcontractors.
Again, it is important to do your research before you bid on a foreclosure. Don’t think just because it’s a foreclosure it’s a good deal. That’s a myth. Don’t fall for it. Do your homework and look at the comparatives that are similar to the foreclosure property. More importantly, determine how much of your cash you’ll need to improve the property so it meets your expectations.
