| || || VALUE: |
How To Spot A Great Deal Today Just because a foreclosed home is priced less than similar homes in the neighborhood does not necessarily make it a great deal for you. Other factors will influence whether the foreclosed property ends up being a great buy or an expensive mistake.
- Final contract price. Some institutional sellers -- lenders and government agencies -- initially price their foreclosed homes much lower than market value to attract buyer interest. If they sell the home through a bidding process, you could end up competing with other interested buyers who can eventually drive the price up closer to or even above market value.
Set a limit on howmuch you are willing to pay for a particular property and stick to yourplan. If one foreclosed home doesn't work out at the price you want topay, chances are another one will.
- Location. A foreclosed property that's significantly less expensive than nearby comparable homes may not have the same locational advantages. Positioned on a busy street, backing into commercial or shopping facilities, or next to a run-down property, the foreclosed home you are considering may in fact be worth less simply because of where it is.
- Condition. Many foreclosed homes show up on the market in less than ideal shape. Former owners, who were having trouble making payments, may not have spent precious cash on repairs and maintenance. Some angry owners and tenants have been known to damage properties on purpose or sell off key components before moving out. In addition, properties that sit vacant with utilities off can become homes to pests, mold and mildew, and may attract vandals.
Bear in mind that institutional sellers are generally not held to the same kind of disclosure requirements as are homeowners, since the lenders/government agencies have not lived in the property. That's why it is so important to order a professional inspection of the home's structure and systems. You may also want to call in inspectors who specialize in checking for radon gas, mold and pests. The inspections themselves can become a challenge if turned-off utilities prevent testing of electrical components, plumbing, appliances and the heating/air conditioning system. And if the lights are out, problems with walls, floors, foundations, etc. are not as readily noticeable.
If anything of concern is found during the inspections, have one or more trusted contractors review the inspection reports, take a look at the issues on the property and develop a written estimate of the repair and fix-up costs you would be responsible for as the new owner. Be sure to factor those costs in with the price of the home to determine whether it really is a bargain.
Remember, any money you spend checking out a foreclosed property will be well worth it if it saves you from purchasing an overpriced money pit.
- Insurability. With property insurance costs rising, it makes sense to determine whether the foreclosed property is insurable and at what cost. Your ability to insure a particular home can be affected by previous insurance losses associated with the home.
As a contingency in your contract, consider asking the seller to provide you with a C.L.U.E. report. The Comprehensive Loss Underwriting Exchange, maintained by Choice Point, Inc. of Atlanta, is an information database used by 90% of insurance providers to keep up with the claims history of policyholders and the homes they insure. The C.L.U.E. Home Seller's Disclosure Report that the seller provides you will detail any insurance losses at the home over the past five years.
- Amenities. Bear in mind, if the bargain-priced foreclosed home you purchase doesn't really meet your family's needs in terms of number of rooms, location, etc., you'll find yourself looking for your next home sooner than later. The costs of quickly selling the not-right home and buying another could easily eat up any savings you achieved buying the foreclosed home in the first place.