Foreclosures Continued

As I'm driving in my car this morning I hear a commercial about how the banks and government are liquidating thousands of foreclosed homes and you can buy them for little or no money down. All you have to do is call a number and sign up for a list of these homes.

Well just like that you can buy houses and make millions of dollars investing in Real Estate. Sounds great, right?

I always get a kick out of these commercials and how misleading they are.

Here's the catch, all they want you to do is call and sign up for the list, because they charge you for these lists. Again, this is most likely outdated information you will be buying and information you can get for free from working with a Realtor.

It amazes me how many investors or want to be investors jump in to real estate with out any knowledge at all. They call an agent to look at homes and go to town. Real Estate still is and will always be a great investment, but as with any investment you have to do your homework.

Consult with a Realtor and lender (unless you have the cash) who have worked with foreclosures before. It is different form buying any other home. The time lines are different and all the banks who manage these properties have different rules in their contracts.

It is getting more difficult to get loans on lower end properties. Too many times I see investors come in with a pre-approval letter in hand ready to go, they put an offer in on a $40,000 only to find out their lender will not loan on a property so low.

It is important to talk with the lender first and discuss what type of property you are looking at. If you are trying to buy low end homes it will be a riskier loan and may require more collateral.

Also, these homes are sold as-is, most of the time the utilities are off and it is difficult to test the systems in the homes. Although most banks will allow time for a home inspection, it may not be worth the money. It most cases I would assume the worst and base your budget on needing to replace it all.

Here is an example: I recently had an investor attempt to purchase one of my listings that was a foreclosure. The home was completely gutted, no furnace, no cabinets, no toilets or pipes, gutted to the drywall. They still insisted on a home inspection and then lost the home because he could not get financing.

The morale here is use your head and be prepared. The more research you do the better off you are. I think home inspections are great, especially for first time buyers or higher end homes, but if you are getting an inspection on low end homes, you may need to do a little more research or consult a different agent.

Again, Real Estate investment can be very lucrative if you do your homework, consult a good Realtor and have a plan. But with any investment there is a great deal of risk, don't go in alone, head first or you could drown trying to do this.