Bank foreclosed homes are up for sale in nearly every community all the time. You just have to know where to look, what to look for, and which to buy. If you learn those three things you are on your way to greater net worth, and an exciting way to invest.
Where to Look for Bank Foreclosed Homes for Sale
1. Aggressive Real Estate Agents - Real Estate agents sometimes don't get the credit they deserve. People balk at their percentage cut, and wonder if they could do it themselves. Here is the trick. It almost always pays to have a real estate agent when you are buying. The seller pays the fees. In other words, you get a professional working for you for free. The trick is, you can't have a laid back real estate agent who is only willing to look for traditional properties. You need someone who recognizes that a little more work gets you a real bargain. They have to be willing to deal with foreclosures...no, they have to be eager.
2. The Assessor's Site - Your county has a property assessor that sets the state's opinion of a property's value. This is how taxes get paid and schools get a budget. Bank foreclosed homes can easily be found by searching for names of banks on these sites. If a property has a bank name as owner, chances are, it's for sale. This site may also give you sale price history, even assessed value. If not, you can get the record page where you can find all that info at the courthouse when it's time.
3. MLS search sites. Most regions now have regional MLS sites you can search for free. No, you do not even have to be a real estate agent to find bank foreclosed homes for sale this way. Type your region (say, Northern Ohio) and MLS into google and see what comes up. If you see a property that is more than a third off what you think it's value is, you may have a bank foreclosed property in front of you. Run it through number 1 or 2 to be sure.
4. A brick and mortar bank - people are scared of banks. I don't know why. We just are. It's intimidating going into those places of power and wealth. Yet, it is often very easy to find their foreclosed properties if you go and ask. Just go to the information or reception desk. Ask if they have bank foreclosed homes for sale. They often hand you a list and ask you if you want the keys to check them out. That's right, the keys. You. No agent, no cop, just you and the house you may want to buy.
5. Street side signs - This is the most obvious place to find bank foreclosed homes for sale, so I save it for last. Chances are, if you find a sign others have found it too. If it stays there long, either the price is too high or the property isn't worth buying. So beware.
What to Look For in Bank Foreclosed Homes for Sale
1. Large discount on approximate value. No one knows what a home is worth until it sells. It is worth what you can sell it for in the end. However, you may be able to snatch one up for a low price because it needs a few small things done that make a big profit difference. The key is to look for homes that you can buy on 5 0or 60 cents on the dollar of their eventual value. That gives you room to do some significant repairs so you can sell the home with confidence.
2. No major deal breaking problems - look past filthy carpet, ruined flooring, or marked up walls. Those are easy to fix. They drop the price in massive ways, but they are easy and relatively cheap to fix. Don't buy homes with sagging rooflines, cracked foundations, leaking basements, or other large problems that require massive fixes. Bank foreclosed homes for sale that have these problems are going cheap for a reason. Don't touch them. If you knew how to handle those kind of bank foreclosures you wouldn't be reading this article.
3. Good neighborhoods with increasing value - don't buy a lemon home in a doozy of a neighborhood. This means you ought to pick your area before you look for homes. You need to know which neighborhoods are good and what their value ranges are. Walk those neighborhoods. Watch their listings. Drive those neighborhoods. Watch the sales. When you can look at a home and guess within 10% of its value, you are ready to find bank foreclosed homes for sale in that area. Don't buy homes in neighborhoods that have declining values though. Again, if you knew how to do that kind of work, you wouldn't be reading this informative little article.
4. Homes that sell quickly - a home that sells quickly is usually a medium sized home that has 3 bedrooms and 1.5-2 baths. Those kind of homes sell like hotcakes because there are always young families looking for a place to start a home. If you can't sell it, you can easily rent it. If you are going to buy a tiny home, or a bigger home, you should know the demand for that kind of home and gauge it's ability to be sold.
Which Bank Foreclosed Homes to Buy
Now you have a small list of homes that are in a neighborhood you understand, with increasing property values, strong demand, and are a good size for both sale and rentals. Now which do you choose?
1. Run the numbers. You need to look at each home as a unique opportunity and be realistic about the numbers. Put together a beginning punch list of repairs. If you will contract out repairs, get some generic ballpark quotes. If you will do it yourself, go to a hardware store with a materials and tools list and add 10-20% to your total at the end. Something else always comes up. Add the cost to the price of the home and see how much equity would be in the home after you have fixed it up.
2. Compare timelines for repairs and updates. Repairs, updates, and remodeling take time. You can't expect to sell a home any sooner than a month after everything is ready and the home is listed. More likely, you are looking at two to three months once closing happens. So use 2 months post listing as your comparison guide (it may take longer.) Decide how many months you think all the repairs and remodels should take. Multiply that timeline times 1.3. It will take at least a third more time than you think. Using an amortization table and a good guess at a mortgage payment, multiply the number of months until sale times the mortgage payment amount. Subtract that amount from the equity you came up with in number 1.
3. Make a low offer on the bank foreclosed home with the greatest potential equity increase. Be ready to walk away from the bank if they won't take a price that makes the home worth it to you. Remember, this will take you a few months work and tie up your funds until you can sell it. It ought to feel worth it to you in the end.