What to Look for in a Community When Buying Pre-Foreclosures
It’s a tragedy that many people are forfeiting their homes during this sub-prime real estate crisis. It was recently reported that foreclosures account for 50% of the homes currently being sold in the US. Even though many people are losing their homes, there are many others who can finally afford a home or are now investing into real estate and taking advantage of these discounted prices.
If you look at any successful real estate investor, they have accumulated much of their wealth by buying when there was a downturn in the market. Donald Trump is a good example of someone who was buying up real estate real when everyone else was selling as illustrated in the quote. “When I first started out in Manhattan, everyone was saying what a terrible market it was, and if I’d listened to them, I would not be where I am today. There are always opportunities.” Donald Trump.
Many of the most successful real estate investors currently see this as an opportune time to buy real estate (Mr. Trump is in this list) and see pre-foreclosures as the greatest means in which to negotiate the best deals.
The great thing about buying a pre-foreclosed home is that you are dealing one-on-one with the owner and have a chance to ask questions and inspect the house. Since the bank has time to evaluate the property there is a higher probability of being granted a mortgage.
It is important to understand the surrounding community or macro aspects when purchasing a pre-foreclosed home. Here are some macro aspects to consider:
- Look around the neighborhood to see how many homes are being foreclosed. It’s best that the house you’re considering for purchase is the only one facing foreclosure. Obviously the more homes in forced sale, the more likely the properties will depreciate.
- Check with the local tenants to see what the rent levels are and whether they have been increasing or decreasing over the last little while.
- How strong is the economy at the town and county levels? Is the current employment rate growing or stagnating?
- Contact the local government to find out about any upcoming infrastructure plans. Plans such as new building permits, train lines, shopping centers and corporations establishing a local presence, would be a good indication of community growth.
- What are the demographics? If there is an extremely high level of seniors in town and only a small percentage living in nursing homes, guess what, it could cause a housing surplus within 10 years or so.
If these macro aspects all work out in your favor, and if the inspection of the house goes well, then chances are it’s a great opportunity for you to buy that pre-foreclosed home. When it comes to making a mint in real estate it’s all about timing and location.
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