With some experts predicting that the housing market may soon be bottoming nationwide, now be a good time to buy a foreclosure.
Earl Lawrence has made his living buying and selling foreclosed properties in South Florida for 20 years. and he thinks that we’re getting close to a bottom in pricing. Meaning depending on where you live, now may be the best time to buy.
Lawrence says, “The way the market is right now the values have plummeted to the point where the prices now are what they were in the early 80s. So now is an excellent time for anyone that’s interested in buying a single family residential home to take advantage of this opportunity”.
But before you go foreclosure shopping, Lawrence has some advice: first, avoid courthouse auctions they are no place for amateurs.
“You could have major title issues. Second thing is the fact that you need to have all cash, and the 3rd thing is that in many instances you don’t know the condition of the property that you’re even bidding on” Lawrence explains.
(Editors Note: This advice isn’t shared by all foreclosure experts, however. Some think amateurs can and should bid on foreclosed properties right alongside the pros: Check out our other stories How NOT to Buy a Foreclosure and How to Buy a Foreclosure.)
Lawrence’s next piece of advice? You don’t need to pay money for an infomercial program or special website. Once foreclosures are taken back by the bank, they’re simply listed by real estate agents like any other house.
He says, “You don’t need to go to a special website for foreclosures to buy. You can just go right to your local Realtor on the multiple listing service”.
So as it turns out, as far as this pro is concerned, foreclosure auctions don’t give you enough reward for the extra risk, and finding foreclosures is as simple as finding any other house: just look on the multiple listings. With one exception: you need to be able to act fast.
“What you need to do is be pre approved by a lender so that you know that you’ll be able to buy the house” Lawrence said.
But whether you’re buying a foreclosure home or any other, here’s some advice on things to look for –and look out for.
Buying a foreclosure? Here’s what to look for
The foreclosure you’re looking for is a diamond in the rough; it has the potential to shine with a little work. So if you can find a fixer-upper property in a great location, you have the potential to make a big profit. Here are some tell-tale signs.
- The homes are in a well-established neighborhood. You should look for older homes that are clean and obviously well kept by their owners.
- The neighborhood is clean. The age of the neighborhood doesn’t matter as long as it sparkles. You won’t see trash in the streets, unkempt yards, or other signs of neglect in these neighborhoods.
- The neighborhood is aging — in a good way. If a neighborhood is well maintained, it will age well. Look for tall, full trees as one sign of neighborhoods that are genteelly aging. You can also research the houses in the neighborhood to find out which ones have changed owners at least once already.
- The neighborhood shows signs of continual improvement. Look for signs that people have improved their homes: add-ons like decks or sun rooms, additions, extensive landscaping, or new siding or other improvements to appearance.
- There are things to do close by. Stores are easy to get to and are nearby, and a variety of important amenities are available. Make sure that shopping complexes and other facilities also look well maintained, safe, and welcoming.
- The property doesn’t need major work. If the improvements to the home are mostly minor and/or cosmetic and would serve as upgrades rather than full-on rehabilitation, go for it. A good rule of thumb is determining that the fix-up costs would be 5% to 10% of the purchase price.
- The structure is sound. A solid foundation is essential for any new relationship–especially the one buyers have with their new home. Make sure there are no major structural problems like damaged foundations or masonry or signs of sagging or settlement.
Buying a foreclosure? Here’s what to avoid
A little research and common sense will help you determine if you should proceed with that foreclosure purchase or turn tail. Here are some red flags that indicate one you’ll want to avoid.
- There’s a lack of owner pride in the area. If you see that many lawns are un-mowed, trees and foliage are unkempt, and fences and other structures are in need of repair, keep moving.
- The area is a hotbed for criminal activity. You can get facts on crime rates in the neighborhood and immediately surrounding areas. You can also take a look at surrounding properties and neighborhoods for signs of vandalism and graffiti. No one will want a house in an unsafe area.
- Neighboring properties are abandoned. You should avoid a property if the surrounding buildings are boarded up or look damaged. There’s probably a chance they’ve been vacant for a while–never a good sign.
- The streets are dirty. Let’s face it: streets full of trash, littered with broken glass, and covered in oil and other stains aren’t appealing to anyone, and they shouldn’t be appealing to you as a deal hunter either.
- There’s nothing to do close by. While this may sound trivial at first, consider the importance of having grocery stores, banks, pharmacies, and other shops and facilities nearby. Having to travel for miles just to buy milk and get gas is a drag. Also pay attention to the condition of existing local shops. Do they look inviting, or are they dilapidated and unwelcoming?
- The highway is too close for comfort. While you don’t want to be too far away from major arterial roads, being too close to them is also something to avoid. No one wants the sights and sounds of a busy expressway right outside their window. Unless there’s some sort of barrier (such as trees, a hedge, or a fence) blocking the highway from the sight and sound of nearby residents, it’s a home to avoid.
- There are industrial sites nearby. There’s nothing wrong with factories and industrial buildings, but no one wants them in their backyard. Make sure there aren’t any industrial buildings nearby that could emit noise, smoke, fumes, or other sources of unpleasantness into the neighborhood.
One last thing: if the foreclosure you’re buying is a fix-up, remember that time is a commodity, too. Besides sinking a lot of money into a property, expect to sink a lot of your time into it, as well. Nobody is going to take care of your foreclosure property like you will. And if you don’t put the time in, things tend to go undone — a potential death knell for any property owner.