Investors often search for foreclosed homes to bid on, figuring they’ll get a bargain deal. But if you don’t bid wisely on a foreclosure, your bargain deal might cost you more money than you have budgeted.
Think of these tips prior to bidding on a foreclosed home:
1. Don’t get into a bidding war. Even though the price may start off low, having multiple bids will greatly raise the price of a foreclosure. Have a set price or budget in mind before bidding starts and know when to back off.
2. Develop relationships with asset managers. Networking with asset managers from various banks will show that you are a serious investor and may get you some inside information, such as if a short sale falls through.
3. Consider renovation costs. Your bargain foreclosure is no longer a bargain if it needs thousands of dollars of basic structural or cosmetic work. Tour the property with a contractor and use our free home improvement cost analysis sheet to take notes. Add these costs into your final budget before bidding on the property.
4. Let a real estate attorney decipher the legalese. Banks will want to move quickly once a foreclosure is purchased and the safest way to proceed is with the help of a real estate attorney. Even if your state doesn’t require an attorney, the process can move more quickly and smoothly having experts review the contracts.
Foreclosures can definitely be great investments but caution should still be used, no matter how great the bargain.
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Couldn’t agree more…especially renovation costs. I have experience in rehabbing about 25 properties. Certainly get much better the more you do. Costs also change from one part of the Country to another!