New and Potential Investors!
The current housing market is definitely a buyer’s market. However there are several things you should take into consideration before buying blindly just because it's cheap.
As we all know, the financial industry has set record numbers on foreclosures and is now overwhelmed with properties. This is causing most of them to literally dump the problem properties at rates well below market value. These properties are costing them more than they are worth, and they simply want them off their books.
Brief Explanation:
Knowing that these properties that are being sold "As Is" are
in need of updating and repair, most people anticipate there will be
remodeling costs involved. Generally speaking, when a person finds one
of these properties, they do a quick walk-thru, and then end up making
an offer to purchase the property. However, most people typically look
at these properties and think that all they have to do is just paint
and replace the carpet and they are done. Unfortunately, most often
there is more involved than just some some minor cosmetics updates.
There are those who just pick a budget from out of thin air, and have no idea of what is truly involved or needing to be done. There are some who may have the tendency to say “it’s just mold, we can paint over it and the problem is solved.”
Regardless if you're purchasing a new home, or an "As-Is" property, get an inspection! Yes, you are purchasing an "As-Is" property and you may have walked through with the realtor to see what needs to be done visually. However, are there repairs needing to be done that you can’t see? Are there termites, water damage, mold or broken joist or rafters you are not able to see? Are there cracks in the walls or foundation you think can just be patched without taking the time to discover the reason the cracks are there? Is the house settling or is half the house sinking? Are the floors buckled from stress or another structural problem?
Important Note: Your inspector should never be your contractor, and your inspector should never suggest who the contractor should be. This would be a serious conflict of interest, not to mention the fact that you are setting yourself up to be taken advantage of.
Prior to making your offer, you should get estimates for any work that will be required. The reason for this is to help you establish your budget, deadlines, closing dates, as well as rehab construction starting and completion dates. Most importantly, it will help you decide just how much you are willing to pay for the property.
Step By Step Process:
Special Note: Prior to searching,
decide if you're looking for a personal residence, rental property for
income, or a fixer flipper.
Additional Note: Prior to searching,
determine if you're planning on
paying cash, conventional financing, home equity financing or using a
hard money lender.
Search for properties as you would normally, whether it is using the MLS, Realtors or Banks.
Do a preliminary walk through to get a rough idea of what you’re in for. Is this just a basic clean up and painting, or is rearranging the layout and major work required.
WRITE down what needs to be done, including every little detail. Don't forget things like vents, light switches, outlets and the covers. These are the things people overlook and leave out when they are compiling a budget.
Go to a home improvement center with your list and GET prices. Don’t just guess what you think things cost, get REAL prices plus taxes and then add 10-20% for scrap, missed items or unseen cost.
Contact several contractors and get estimates for the repairs, updates, changes or upgrades you are wanting. Then decide if you will be prepared to move forward with your plans or make changes according to budgets or timelines.
Make your offer to the seller to get the property under contract and establish your desired closing date. When making your offer, establish if you’re paying the closing costs, splitting the closing costs, or requiring the seller to pay closing cost. Include an inspection that could uncover hidden termite, water or structural damages that may have been forgotten in disclosures or was unknown to the seller.
These are some very simple basic
steps and
procedures to follow in order to protect yourself and your
investment. Even on bargain properties that are being sold “as-is”.
The basic thing is to be through in your research and budget
and make sure you know exactly what you are getting yourself into
before leaping.
Special Note:
These are strictly recommendations that consumers should consider when considering investing in foreclosure and fixer upper properties.It is the sole responsibility of the homeowner and investor to decide how to proceed with a process that meets their own specific needs.
Author Bio:
This article was written by Walter Sanderson, founder of this website, STL Home Rehabbers. He has more than 15 years experience in rehabbing and remodeling homes. For more information about him, you can check out http://waltersanderson.stlhomerehabbers.com/.
Article Source: http://www.stlhomerehabbers.com/
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