Questions Foreclosure Buyers Should Ask

1.   How can you tell a bad foreclosure from a good one?
Making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, assessments, judgments, home equity lines of credit, and possibly a second or third mortgage. Any or all of these financial obligations could become buyer’s responsibility when they purchase a foreclosed property simply by it being transferred to the new owner.  Title work needs to be started early to discover potential problematic issues that can cause an unpredicted delay in closing.

2.  What are the costs of buying a foreclosure?
It takes money to make money. The best opportunities are for buyers with cash. If you are planning to rent out the property or even resell it for a quick profit, make sure they consider the carrying costs, including sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you’ve calculated all the expenses, add on another 10% to 15%.

3.  How does choice of neighborhood affect foreclosure investments?
Looking for a good investment should generally avoid neighborhoods overrun with foreclosures. Buyers will be tempted to buy foreclosures in the areas that offer the steepest discounts – but these also carry the most risk of further depreciation. Look in well established neighborhoods with good schools and transportation.