Buying a Foreclosure

Buying a Foreclosure:

If you’re on a strict budget or looking out for a good investment property, foreclosed homes can be an appealing choice. But, there are a few steps you can take to protect the investment and avoid future issues.

1. View the Home in Person: Take a close look and take a tally of how much you will need to spend on improvements. The landscape and outward appearance is a telltale sign of how long the house has been vacant.

2. Winter Vacancy: If the house has been vacant during the winter months, ensure that it’s been winterized to avoid tens of thousands in plumbing repairs.

3. Neighborhood Walk: Walk around the neighborhood to determine its “health”. If you’re planning on flipping it, do their homework by looking for a safe established or “up & coming” neighborhood with similar homes on the street in well kept condition.

4. Hire an Inspector: An inspector who is looking out for your interests has a trained eye which can point out latent defects not visible to the naked eye. I would strongly suggest a termite inspection as well. The inspector’s charge of about $400-500. is well worth the cost as knowledge is power. It could save you thousands in the short term.

5. Realtor on Your Side: If you have your trusted realtor by your side, she can provide you with an up to date market analysis. Having local market data in hand should help you make an informed decision.

Go into buying a foreclosure with your eyes wide open.

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Appraisal FEVER

Appraisal Fever: It’s what happens when you are waiting on the home appraisal with knots in your stomach seeing if what you offered to pay is really what its worth.

Listen, we’ve all gone through it in this down economy. We negotiate a deal and literally sit on pins and needles waiting on that email from the bank’s appraiser. Did the house make the cut? Did we pay too much? Is this deal going to fall through? And then it comes: You either get the bomb email that tells you it appraised for about $10-15k less than the purchase price or you get the green light. Everyone hopes for that green light.

When the bomb drops, nobody is happy. The seller gets angry and defensive, the buyer gets scared and the realtor is left trying to iron both sides out.

But today, I got the green light and I’m feeling pretty good. I did a lot a research for my buyers before submitting that offer which involved researching about 20 closed properties, FSBO transactions, price per square foot and quality of construction. After all of that work, I felt pretty confident that this would appraise at the purchase price. I even called a local appraiser and went over the numbers of the last 3 homes to close on that street to verify my number. He agreed and so we went in strong writing up the contract.

The point is you never know what that bank appraiser is going to bring to the table. He could be coming from NY or Southern CT which is a totally different ball game. He could have had a bad day where he was just told by his boss that he’d better be more conservative to protect the bank’s interests or his job is on the line. He could be a SHE who had two write-ups for over-inflating value or she never even went to the town hall to do her research (like all appraisers are supposed to do). It’s a mixed bag and you just hope for the best.

For today, the appraisal fever has passed and I look to moving forward and getting my buyers to the closing table and into their new home. After all, it’s all about them and I can’t help feel a sense of pride for a job well done.

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