Speculators fled the real-estate market in 2006 when home prices began falling. But there are investors looking to make money in the battered...
Speculators fled the real-estate market in 2006 when home prices began falling.
But there are investors looking to make money in the battered housing market by buying foreclosures — and they may be on to something.
The bank that owns a foreclosed home is looking to recover the value of the home’s unpaid mortgage, and quickly. That presents an opportunity to get a property below market value.
“You can double your money if buy and hold for 10 years,” says Ralph Roberts, a Detroit-area broker and author of “Foreclosure Investing for Dummies.”
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“Interest rates are low and prices are low. Now is a good time to buy,” Roberts says.
He says most foreclosure buyers get properties for between 75 and 90 percent of market value.
Roberts advises buying a property near your workplace or home. After looking at several, go with the best deal. “Don’t negotiate with the bank — make an offer and then go dark,” he says.
If you buy at auction, the full price is often required at the event, or soon after, so be prepared with the payment.
Buying foreclosures is not without risk. “Just because it’s in foreclosure doesn’t mean it’s a bargain,” Roberts says.
Don’t buy in a market with too many foreclosed homes — no more than a few in any area.
Also, regular maintenance likely wasn’t done, so there may be substantial costs beyond the purchase price.
And don’t trust late-night TV gurus — there are scams aplenty.
“Many are simply very good sales people who know how to push your buttons to extract a tremendous amount of money out of you,” says Alexis McGee of Foreclosures.com. She lists several well-known schemes on her Web site.
“Get a good agent, good lawyer, good inspector and do your homework,” Roberts says. Then start checking the foreclosure listings.