There are some fantastic real estate deals on the market right now. From properties in various stages of foreclosure to bank-owned property, you have a great opportunity to get the home you want at a bargain price. But what about those holes in the wall and that pet stained carpet? Looking past these stressful items can help you reap huge benefits financially.
Over the past several years we have seen huge numbers of distressed sales. According to RealtyTrac, 23% of all U.S. home sales in 2011 were in some stage of foreclosure. So nearly one in every four homes sold in 2011 was a distress sale. Couple this with the fact that these distressed homes sell at a significant discount to the non-distress sales (40% discount for bank-owned homes), there is a huge opportunity for buyers.
Along with the big discounts on distressed property typically comes evidence of neglect. The home may have sat empty for an extended period of time or the previous owner may have stopped caring when the bank started getting nasty with them. Whatever the case, these deals typically come with issues. So how do you get past these items to realize your dreams? My wife and I purchased a bank owned property last year…so here is my checklist, as a builder that just went through the process, for evaluating potential properties.
- Look Past the Cosmetic Items: The paint may be ugly or the carpet may have spots. Or the kitchen may not be as clean as you like. None of these items should ever be a deal breaker in that they are easy and relatively inexpensive to remedy.
- Focus on the Space: The most expensive thing you can do is start moving walls. It’s totally doable, but why go into a major renovation if you don’t have to? However, if you fall in love with a place that meets all of your other needs but it really requires some re-tooling, that’s ok too. Just make sure you estimate the cost into the overall project price.
- Be Aware of “Too Much Work” Syndrome: When I was looking at properties I found myself at times saying, there’s just too much work with that property. Yes I am a builder and no I don’t get intimidated by much when it comes to remodeling. But sometimes you get that lazy feeling…or your human nature takes over and you want it to be perfect right now! Don’t let this keep you from getting the best property at the lowest price. If you do find a screaming deal in a great location but it needs a new kitchen, bathroom…etc., don’t hesitate to go for it. I find these to be the best deals in today’s real estate market. Why? Because most buyers don’t want to go through the hassle of remodeling. They want it to be perfect right now. Don’t forget, anything good is worth waiting for.
- Perform a Thorough Inspection: Once you’ve gone through the items above and have decided that this property has big potential, go ahead and perform a thorough inspection. For the average person, this means hiring a qualified individual to review the home for any major defects including a review of the structure, mechanical systems, roof,…etc.
Once you have a list of items to be completed, create an estimate for each item to determine your total investment required. Your builder consultant, home inspector and realtor should be able to help you with the rough cost estimates.
When comparing the cost to update and purchase a distressed property with a non-distress sale, it can be difficult to stay focused on what’s important. Keep in mind, if you end up adding a new kitchen or bathroom to the distressed property, you will get exactly what you want…which should count for something.
If you stay focused, you may ultimately end up with the perfect home with your preferred color and style selections at a fantastic price!
nice stuff about take a stress out life.
March 5th, 2012 at 10:13 pm
Thank you very much for the good news. It’s good to read that things are about to get better. Thanks for advices as well.
March 6th, 2012 at 11:40 am
Foreclosures and bank-owned properties do seem a bit scary to invest in because of the work that you have to put into it to get it up and running. But if you find one that has a lot of potential and that needs just the right amount of work, then you can actually flip it to your advantage. Whether you choose to sell it or rent it out, you’ll earn big time in the future.
March 11th, 2012 at 9:23 pm
nice post thanks for post this article.
March 13th, 2012 at 2:44 am
Excellent article. As you know here in Phoenix, 65% of our market is distressed and this info is of great help. Thank you again for the great info.
March 14th, 2012 at 11:51 am
I too believe that the number one source of distress is neglect from the previous owner. In many cases the problems are aesthetic, but some times the previous homeowner neglected essential maintenance tasks and hidden issues could cause problems down the line. This is where a certified, state licensed home inspector can be most valuable. Home inspectors are trained with an eye to find and identify problems that could cost home buyers a lot of money.
October 3rd, 2012 at 6:12 am
We have seen large amounts of troubled sales over the past few years. Thanks for sharing.
October 17th, 2012 at 5:27 am