Is it good to buy foreclosure property's...if yes can you explaine why?
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People often throw around claims that buying foreclosed properties is a good investment. Here is the truth. Buying foreclosed properties can have a good return, but it also carries high risks. The main risks are that: (1) you usually don't get to see the inside of the place; and (2) the previous owners can redeem (they can take the property back by paying off their debts within a certain amount of time, even after you buy it). There are also procedural complications and potential future claims. It can be a real headache, especially if you are not a real estate professional. Also, the selection is very limited so you are not going to be able select the place you actually want to live in. If you try to buy these properties, you will be competing against sophisticated investors who are not buying these places to live in, so they don't really care what the place is like and they know how to deal with the complications of foreclosure.
Now, I am not saying that you should stay away from foreclosures, just that it is not for everyone, and that it is much more risky and complicated than people realize.
If you want to get into it, try attending a sheriff's property sale. The sheriff's office or the court website for your county will probably advertise them. Also get their rules and a list of properties which may be sold.
Owning property is always better than paying rent to some other landowner. Foreclosure property has some advantage in that it can sometimes be cheaper, but bears pitfalls. Having to evict tenants or former owners, claims by past owners attempting to recover property by proving that the foreclosure was handled wrong, a complex process of foreclosure with many fees and more are all potential problems of such acquisitions. Why did the prior owners default and allow the property to go to sale? Do subsisting claims or liens against the property exist? Are there structural or land issues: structural failure, tainted soil, or what? Doing the research to find these answers is critical before bidding on a property or attempting to acquire it in lieu of foreclosure. Be careful.
The reason why is the low LTV% if it isnt low dont buy find one that is.
My wife and I have dealt with quite a few people looking for bank sales, none of which have gone very well. In our experience, people looking for these sorts of properties tend to be looking for a deal. If the deals were out there, people would be snapping them up left, right and centre.
Problem is, they usually aren't such a good deal. Any of the foreclosures we have been to have been disasters. It seems that when people find out they bank is about to take their house, they have a habit of trashing it. All of the ones we have seen have been almost destroyed. Thus, any potential savings would be taken up in repair bills. Plus the headache...
In Toronto, the market we work in, these sorts of sales are not usually such a deal anyway. The way it works here is that the bank has to sell the place for market value, paying back to the owner any monies paid above what is owed the bank. This came about because the owners were upset when the banks would simply sell for the outstanding mortgage amount, depriving the owners of any potential equity they had in the house.
Now, the bank appraises the house and lists it at first at 6% above the current market value. After 30 days, they drop 2%, then another 2% after another 30 days and so on, until it is sold (or the price hits the amount owing).
So buying a house such as that, unless you wait it out for months and months, you will not be getting it any cheaper than another similar house. But, if you are willing to wait it out until the price comes down enough, then be willing to pay for the repairs and be patient enough to wait out the repairs, then go ahead.
But, in our experience, buying bank sale houses is never as good an idea as it seems.
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