Guest Blogger: Fixing Up Foreclosure Homes: Is It Worth It?

Guest Blogger #535, Entry #1208, May 22, 2012

The market for flipping houses today isn’t what it was several years ago. With the housing market still in a state of complete inertia, any pundit worth his salt will tell you that this is the wrong time to be looking at selling a house. And yet, it is an incredible time to buy. A market flooded with foreclosures (and banks that are selling low to recoup costs) provides for a veritable smorgasbord of once-in-a-lifetime opportunities for people willing to put in a little elbow grease to fix a place up. But there are a few potential problems that you probably want to know about before you go ahead and get a fixer-upper foreclosure, whether you’re planning to flip it or live there for years to come. Here are some things to consider.

Is the timing right to buy a foreclosure?

Image via: Terrie Daughtry.Pinterest

Is the timing right?

First, you need to consider that selling right now is not an option. It doesn’t matter how many upgrades you do, you’re only likely to lose money if your goal is to sell within the next few months. Between the cost of materials, labor, and monthly mortgage payments, it’s just not a great time for flipping, so you might as well forget about it. Even killer deals on homes in desirable areas are not likely to sell for more than you pay, regardless of how much work you put into them. There are just too many good deals on the market for potential buyers.

Fixer-upper opportunity

Now, if you’re looking for a fixer-upper opportunity for yourself, that’s a different story. In this case, now is the absolute best time to buy. If you plan to hold on to your property for the next several years you could see a massive return on your investment down the road as the economy recovers from recession and the housing market begins to turn around. A couple of decades from now you could be holding a property that is worth several times what you paid for it. So in that respect, buying a foreclosure that you can spend the next 10, 20, or 30 years fixing up is ideal.

You may find a diamond in the rough to fix up!

Image via: Houzz

Tips to consider

But there are a few things to watch out for. The first is that you need to be thorough when checking out the property and the paperwork attached to it. Foreclosures are home sales through the bank, not the homeowner (who has apparently defaulted). This means that they are usually “as is” sales and once you sign on the dotted line and take possession you have no recourse should things go wrong (unlike the rules that pertain to a private sale). So you not only need to arrange for a meticulous inspection of the property itself, but you should also take pains to look into every piece of paperwork associated with your property. Are there additional mortgages or liens? Does the property suffer from any disputes (over boundary lines, etc.)? These are things you need to be aware of in a foreclosure situation since you take them on with the title.

Whether you’re looking at Seattle, Miami, or Cleveland foreclosures, you need to take the same precautions to ensure that you are protected as a buyer. And although you can find some incredible deals on bank-owned properties that just need a little TLC, you should definitely plan on holding your home purchase for the foreseeable future if you want to realize a return on your investment.

For more home buying & selling tips on Stagetecture, click here.