The flood of foreclosed properties for sale that have inundated the real estate market since 2008 has finally begun to wane, and in recent months has appeared more like a swift stream. Despite reports of a minor uptick in foreclosure rates last quarter, it seems that nationwide, states are wrapping up the foreclosure crisis. While overall, this is good news that the economy is continuing to move on (and up), for real estate investors, this bit of good news means that the end is in sight for a large pool of attractive investment opportunities.
However, even with foreclosure rates that are nearing pre-financial crisis numbers, there are still deals and bargains to be found. If you somehow missed the foreclosure properties boom over the last 5 years, let’s take a look at what a foreclosure means exactly, some guidelines for assessing the investment potential of foreclosure (or pre-foreclosure) properties for sale, and the purchasing process.
When considering foreclosure properties for sale, you don’t just want a cheap bargain — you want a good value. The current real estate market shows evidence that institutional investors are beginning to slow their purchasing frenzy, which means there isn’t as much competition. But don’t expect to get the same deep discounts that were readily available a year of two ago.
To determine a property’s value, know what similar properties are selling for using “comps” of actual recent sales, which will help you establish a range of prices, a typical price per square foot and an average price.
A good rule of thumb is to begin with a fair price for a similar but well-maintained property, subtract the cost of repairs, and offer approximately 80% of that amount.
When a property goes to auction and no one bids (or no one bids enough to cover the outstanding mortgage), the bank that holds the loan gets title to the home. The bank will usually repair the worst damage and hire a real estate agent who specializes in foreclosures to market the property. The selling agent will allow you to see what’s inside so that you know exactly what you're buying.
Good foreclosed properties for sale are merely those that have sat empty and neglected for months, with dead lawns, peeling paint and other relatively minor problems. Others may require significant repairs. A good home inspector and a licensed contractor should be called in to evaluate the property before you submit an offer to purchase.
In addition, it is important to understand the property’s chain of title and to collect any available information on the history of the property to anticipate any liens or future claims on the property.
Knowing exactly what you are getting into before buying can prevent a lot of wasted time and money. However, if the property is a good fit for your needs and the price is right, foreclosed and pre-foreclosure properties for sale can still offer tremendous investment opportunities.
While the foreclosure rate in Currituck County, N.C. is currently 0.2% and trending downwards, there are still bargain properties for sale in this growing region that is home to the popular tourist destination of the Outer Banks and lies just 30 minutes south of Hampton Roads, Va. Learn more about the appeal and incentives for businesses to locate in Currituck County by downloading our free eBook.
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