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New Wave of Foreclosures Worth a Look?

According to Realty Trac, foreclosures are expected to continue to cast a shadow on the nation’s housing market well into 2014 thanks to processing delays and a lackluster economic outlook for the short term. As a result, banks are starting to push through a new wave of foreclosures to help clear a backlog of distressed properties.

Is it worthwhile to purchase foreclosed properties for sale and renovate them ?  Yes, because they represent an opportunity to purchase a home below market, perhaps in a neighborhood you may not have been able to afford previously.  However, buyer beware because there are risks involved when purchasing a foreclosed property.

One key risk of purchasing a foreclosed property is that you may not be getting the home at the bargain price you hoped for.  Whenever foreclosure supply outpaces foreclosure sales, the volume of foreclosures rises…causing further decline of housing prices.

Also, the last thing a homeowner in foreclosure is going to do is invest in the upkeep of their home. So, another risk of buying a foreclosed home is getting a money pit.  The important factors to consider before bidding on or making an offer on a foreclosed home are:

1) the ‘market’ value of the home if it were in move-in condition,

2) the value of the home in its current condition,

3) the costs and time associated with renovating the home to make it livable,

4) whether the foreclosed home will be your primary residence or an investment property, and if an investment property, whether this home aligns with your investment strategy (i.e. rental vs. flip).

To assess the costs and time associated with renovating the home that has not been well cared for and suffers from neglect, have the home thoroughly inspected by a professional. This way you’ll know whether the home is worth renovating.

 

 

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