We Had To Auction The Property As A Single Family Home

Category: Finance, Real Estate.

Buying foreclosed properties presents an opportunity for investors as well as someone looking to purchase a home, or lot on, condo which to build, for their personal use.

Many lenders will offer special financing to qualified buyers to facilitate a quick transaction. Banks, Mortgage companies, Savings Institutions, Insurance Companies all end up with REO( Real estate owned) inventory that they need to sell to clear off their books. It is important to thoroughly investigate potential purchases. Those costs need to be factored into the purchase price equation. Many foreclosed properties have been neglected and may need significant repairs or rehabilitation. 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.

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. When negotiating a contract on such properties include provisions for inspections with the utilities on before finalizing the transaction. Some lenders will include" rehabilitation funds" in the mortgage while others may not. There are always surprises during any rehabilitation program, especially foreclosures. Expect the unexpected. Do your homework prior to entering into any contract.

Not infrequently, local jurisdictions will rezone unoccupied property, particulary if there have been no utilities for some time. Check with the local zoning department to make sure that the property is still zoned and suitable for the use you intend. This is particularly likely if a neighborhood is undergoing considerable change or if a property had some special zoning exception" grandfathered" . The property had been operated as a small aprtment building with eight( 1 bedroom, 1 bath) apartments. I auctioned a property for a lender in Jacksonville, FL that had been vacant and without utilites for 2 years. In doing our auction preparation we found that the city had rezoned the property from multifamily to single family.

The purchaser had to spend considerable monies remodeling the house, to remove 7 kitchens and end up with a workable single family home. We had to auction the property as a 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.