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Real Estate Investing Articles
Buying Real Estate
Foreclosures
Les Bryant
Buying foreclosed
properties presents an
opportunity for investors as well as someone
looking to purchase a home, condo, or lot on
which to build, for their personal use. Banks,
Savings Institutions, Mortgage companies,
Insurance Companies all end up with REO
(Real estate owned) inventory that they need
to sell to clear off their books. Many lenders
will offer special financing to qualified buyers
to facilitate a quick transaction
It is important to
thoroughly investigate
potential purchases. Many foreclosed
properties have been neglected and may
need significant repairs or rehabilitation.
Those costs need to be factored into the
purchase price equation. Often vacant
properties do not have water, electric or
other utilities turned on so it may be
difficult to determine whether there are
plumbing leaks, electrical or air conditioning
malfunctions or other deficiencies. When
negotiating a contract on such properties
include provisions for inspections with the
utilities on before finalizing the transaction.
If the proposed foreclosure
purchase is going to
require repairs, make sure that you have enough
money to adequately undertake the repairs and
carry the negative cash flow during the repair
process. Some lenders will include "rehabilitation
funds" in the mortgage while others may not.
Expect the unexpected. There are always surprises
during any rehabilitation program, especially
foreclosures.
Do your homework prior
to entering into any
contract. Check with the local zoning department
to make sure that the property is still zoned and
suitable for the use you intend. Not infrequently,
local jurisdictions will rezone unoccupied property,
particulary if there have been no utilities for some
time. This is particularly likely if a neighborhood is
undergoing considerable change or if a property had
some special zoning exception "grandfathered". I
auctioned a property for a lender in Jacksonville, FL
that had been vacant and without utilites for 2 years.
The property had been operated as a small aprtment
building with eight (1 bedroom, 1 bath) apartments.
In doing our auction preparation we found that the city
had rezoned the property from multifamily to single
family. We had to auction the property as a single
family home. The purchaser had to spend considerable
monies remodeling the house, to remove 7 kitchens
and end up with a workable single family home. When
the original lender made a mortgage on the 8 unit
apartment building their "old" appraisal was for
significantly more than the single family home was
worth. Just because a foreclosure sounds cheap, it
doesn't make it a good buy for you.
Article Source: http://www.articleshine.com
About the Author:
Les Bryant has been a licensed real estate
broker, auctioneer, mortgage broker and
building contractor in Florida for 30 years.
For more information on buying or selling
real estate visit www.realestators.com
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