Real Estate

 

Buying a Foreclosure – Is It Worth
The Hassle Buying a Foreclosure?


Buying a Foreclosure - Is It Worth It?
Potential home buyers and new investors ask this question all of time, “Is It Worth The Hassle Buying a Foreclosure?”

My answer is in the form of a question, “Is it worth the hassle to attend college four years and obtain a degree in chemical engineering?”

Of course it is because of the payoff!

The fact of the matter is, it’s not a hassle, it’s par for the course.

When it comes to buying a foreclosure, smart home buyers understand the legwork they put in is going to pay off handsomely when they walk away buying a home at fifty to eighty percent below fair market value!

Someone once said, “There’s two sides to every story and then there’s the truth!” When it comes to buying a foreclosure, that profound truth holds true. You’ve probably seen the advertisements of investors such as Robert G. Allen, Robert Shemin, Carleton Sheets and Donald Trump boldly declaring how to make unbelievable profits buying distressed properties. On the flip side, you may have heard about the investors and homeowners who literally lost their shirts dealing with distressed properties. The truth is; they both are right!

In terms of buying a foreclosure, a person must be versed in the “Ins and Outs” of dealing with distressed properties. If not, they will definitely see the legwork as being a hassle and miss the enormous payoff. The hassle many refer to is all the work that goes into sifting through properties in order to spot potential deals.

Once you find something that looks good, then comes the legwork to determine if the numbers are going to work for you. This is where most people BLOW IT when it comes to buying a foreclosure!

Ponder this question for a moment, “How is it that two people can look at the same property and one walk away and the other buys the deal and puts their heart and soul into it but they end up losing money?” The answer is, the person who walked away saw the numbers.

The person who bought the deal didn’t know how to crunch the numbers so they end up buying a foreclosure that has very little to zero profit potential. Once their financial Tsunami has cleared somewhat, they walk away with a negative connotation towards buying distressed properties. They see it as being too much of a hassle when in fact the issue was their lack of knowledge!

If you are going to be dealing in distressed propertied whether you are looking for a primary home or as investment properties, you must know the process of identifying deals and walking away from thuds.

That means you should know how to perform a comparative market analysis and come to a genuine FMV Fair Market Value if the property were in move-in condition. Not mint condition, but move-in condition. Once you establish the FMV you need to determine, through a thorough inspection, how much you will be required to invest to get the property into move-in condition.

Oftentimes, I’ve looked at deals that fell apart, (meaning the person who bought the distressed property lost money) and it didn’t register to them that legwork was required and that the numbers had to line up. They assumed that because the deal said, “Foreclosure” it was going to automatically make money! There’s simply no truth to that belief.

If you are going to engage in buying a foreclosure, DO YOUR HOMEWORK! My advice to newbies is to take time to educate yourself on the ins and outs of buying a foreclosure before you jump into the water. In summation, there is no hassle to the smart home buyer and savvy investor; it’s only legwork that’s par for the course that will payoff!

Author, Joel Marks of REODr.com

 


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