A Few Notes On Buying Previosly Foreclosed Property

For those of us working around the big cities there has been no shortage of foreclosures. Now the market has improved somewhat and these foreclosures are re-entering the market as fully renovated properties.

Buying these properties is a good idea. In many cases the work is excellently done-just make sure it actually is. Choose your home inspector wisely.

As far as the appraisal, be aware that there may be two full appraisals completed on the property, especially if it is FHA and there has been a short turn around time between now and the foreclosure. Since the advent of HVCC appraisals have gotten darn expensive. At $450+/- a pop, think carefully who is going for pay for this. Is it entirely the responsibility of the buyer?

Also there are some neighborhoods which have been so stricken with foreclosures that 90% of sales are either short sales, foreclosures, estate sales or just properties that need a lot of work.
This leaves just 10% of sales for "normal sales" and a few rehabbs . And you are buying one of them. Even if there are three sales to support the sales price, does that actually mean the house if worth that amount? Think about that carefully! Ask your Realtor to really analyse the market and get him to explain the number of foreclosures etc verses the number of rehabbed sales.

Look at the current market for guidance as well. Seeing a large inventory is a red flag for the future value of your rehabbed property. These forecloures will also end up rehabbed and competing against each other which means prices will drop if demand stays stable. This would mean that the value ($$ you pay) should definately not be at the top end of the range.