1) Why is it worthwhile to check out foreclosed properties for sale?

It is worthwhile to check out foreclosed properties because: (1)
amazing deals can be achieved as banks are very willing to negotiate
and anxious to get these off their balance sheets; (2) if purchased
for a great deal, (a quick and dirty calculation of a great deal is
take 2% of the purchase price and this should be the minimum of what
you can rent the property for), a hefty positive monthly cash flow can
be achieved by renting the property; and (3) it helps the economy by
having the enormous amount of excess inventory absorbed by savvy
Investors.

2) What are the risks of purchasing a foreclosed property right now?

The risks of purchasing a foreclosed property right now is that there
potentially could be many more coming on the market. Therefore, you
need to be prepared to hold this property for at least 3 to 5 years,
and have enough cash reserve to support the property for 12 months
even if it can’t be rented during this time.

3) Why is it important to have a foreclosed property thoroughly inspected by
a professional prior to purchasing?

Many foreclosed properties have been neglected and sitting for a long
time. This means that regular maintenance and repairs has likely not
been performed, and unfortunately, theft and vandalism particular as
it relates to air conditioner coils and copper wiring is prevalent.
Additionally, the normal disclosures required by a seller of a
residential home are not required to be made by the bank. Therefore,
a professional inspection is a must before you finalize the purchase
of any foreclosed property.

4) What type of professional inspector is best to hire? Any
tips/suggestions?

An inspector should be a member of one or more real estate inspector
associations. For example, there is the National Association of Home
Inspectors, Inc. (NAHI) or the National Association of Real-Estate
Inspection & Evaluation Services (NARIES). Also, at least 3 referrals
should be supplied by the inspector and the inspector should be a
specialists in the type of real estate being inspected (I.e.
residential, commercial retail, commercial office, etc.)

5) What should the inspector be looking for in the foreclosed property?

First and foremost, an inspector should be looking for things that
can’t be seen by the non-professional eye. For example, structural
issues, electrical issues, mold or mildew, is the roof in good shape,
is their asbestos, is the stucco the fake kind that was subject to
recall due to defects, is the siding the kind subject to re-call due
to defects? In other words, the inspector is looking for things that
a novice couldn’t easily find themselves.

6) What are the major warning signs/red flags that should tell you not to
purchase this property?

If you are buying in a neighborhood where almost every house is
vacant, this is a bad sign unless you are prepared to buy almost every
house in that neighborhood. Otherwise, you will be one of many and
people don’t like to rent in vacant neighborhoods. The other
foreclosed vacant homes could be sitting for a very long time and this
could continue to deteriorate the value of your home. Also, you
should not buy in an area that you can’t get to within one-hour.
Trust me from my own experience, you wont properly maintain your
property if you can’t get there within one hour.

7) What are the important factors to realize before bidding on or making an
offer on a foreclosed home?

The three most important factors are: (1) Knowing the total cost it
will take you to get the property back to rentable or sellable shape;
(2) Knowing what the other comparable homes are selling for within a
1/2 mile area from the home your buying and (3) making absolutely sure
you can afford to fix the house up, maintain the house, and hold the
house even if it doesn’t rent for at least 12 months.

8) Any tips on how to use the results of the home inspection to your
advantage as a bidder or potential purchaser of a foreclosed property,
especially in this buyer’s market?

It is critical that the seller is made aware of the results of your
professional home inspection. The key to using this effectively for
getting a better price is your willingness to walk from the deal. You
MUST NOT GET EMOTIONALLY TIED to any one property. There are lots to
choose from, and I am afraid there will be for a while. If you’re
willing to walk from a deal unless you get your price, then you will
likely get your price.

9) Any other thoughts, tips, suggestions on this topic?

 Buying and
managing real estate is not for the faint of heart.
It’s hard work and very hands on. It is also an illiquid investment.
Go into this with your eyes wide open and make sure you have the time
And resources available to work this type of investment. On my blog
At woodysgoodies.info, I have an article I wrote called ” Basic
Rules on Buying Real Estate Are Good (Learning From my Mistakes is
Also Good)” (click here to read). I strongly recommend this be read before you make your
first purchase.