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!