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Article by Elaine Voncannon
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| 10 Tips for Investing in Distressed or Foreclosed
Properties |
- Search on the world wide web for distressed or foreclosed properties as a starting point. Use
a professional REALTOR to identify great foreclosure deals for you. You may be successful at searching
the web on your own, but keep in mind some of the information is outdated, some may be incorrect, and
some of the available properties are not even listed. A REALTOR subscribes to updated MLS listings and
can offer you the most current information available.
- If you search yourself for distressed properties and purchase from the selling agent, you are
paying a commission to someone with a vested interest. Obtain objectivity in the sale by working with
your own REALTOR. You won’t pay any more. Technically, everyone works for the seller, since they pay the
commission.
- With distressed or foreclosed properties, time is of the essence. Purchasers must close on the
date specified by the agency, and cannot close after this without penalties of $25-200 per day.
- It takes 1-3 weeks to qualify a loan. If you are approved for a loan, make sure you are qualified
by your lender as soon as possible. If you are paying by cash, make certain funds are available. If
finances are in order, the REALTOR will then submit an offer. When the offer is accepted by both seller
and buyer, the REALTOR will submit the ratified contract to the lender and closing agent. These steps
will begin the process of a successful real estate transaction.
- When purchasing a distressed property, always obtain 3-4 bids from different contractors to estimate
costs of repairs, if you do not plan on doing the work yourself.
- If you are going to sell the property after rehabilitating it, ask your REALTOR to research similar
properties in the neighborhood to ascertain market price.
- Keep copious records for tax deductions. Any expenses related to the purchase, repair, or
maintenance of the property may qualify. Meticulous records are key to a profitable real estate
venture.
- The title you receive after purchasing a distressed or foreclosed property is a special warranty
deed rather than a general warranty deed. Some buyers are alarmed by this, but there is no need to
worry. The purchase of title insurance protects the buyer. Each lender purchases insurance to protect
the loan as well. Titling insurance should be obtained by the property purchaser. It is always offered
by the closing agent. Consider using an attorney instead of a titling company as your closing agent.
An attorney is only $50-75 more than a titling company. A real estate attorney can remedy any situation
that may arise. Therefore, they are more efficient representatives on time sensitive foreclosure
properties.
- Foreclosure properties require special addendums and special contracts by the
individual bank and HUD office (where applicable).
- Foreclosure properties are potentially the most profitable, but require the most attention to
detail. A REALTOR experienced in foreclosure deals is highly desirable because the paperwork
must be in order to submit a proper bid, and timeliness is critical.
Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg, Virginia, and she manages
investment property as part of her business. Her husband Joe is a contractor who collaborates with
her on rehabilitation of properties. She has helped numerous clients invest in and make money on
property investments in Southeastern Virginia.
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