Foreclosures seem to be synonymous with good deals these days but are they? My first Real Estate purchase was a foreclosure and that’s what I thought. The truth is, that’s not always the case.
The main factor in a piece of property’s value is and will always be location, location and location. So, you may see some property that is completely boarded on the wrong side of town with the sign “foreclosure sale” and assume the property is cheap, and it probably is. However, consider the property’s location, its condition, and what kind of an investment it would take to make the place habitable.
Another example of a foreclosure would be one in a typical suburban area that is in fairly decent condition or even move in condition. Do you think this property is going to be cheap or a “deal”? This may not be the case. Consider the following, who owns the foreclosed property? The answer being the bank. We all know banks have large amounts of money. Having large amounts of money can greatly influence how someone is willing to bargain with you and potentially how long that can hold out in selling.
Adversely a better seller to buy from may be someone who is being in the process of foreclosure rather than dealing with the bank. If you are dealing one on one with an individual who is motivated to sell for whatever reason be it financial, divorce, moving, etc., this person may be more apt to strike a deal with you for favorable pricing (and possibly favorable seller financing) than you would be able to do with a big bank. Make sense?
In making any financial decision it is imperative that you do your due diligence and thoroughly check out the investment. And, in the case of real estate always make sure you buy in the money property and have an equity cushion allowing you to get out if need be. Good luck out there, hope it helps some of you out there!