Foreclosures are starting to fall across the country. According to a November 2017 data by RealtyTrac, foreclosed properties were 25% lower compared to that of the previous year. Regardless of the decline, there are still some areas where foreclosures account for a significant portion of homes in the market.
So the question for home buyers is: is buying foreclosed homes a good idea?
The answer is yes. Although buying foreclosures have associated risks, you can actually lower those risks. But for now, we’re going to talk about the reasons why buying foreclosed homes is a good idea. These are the following:
- Affordable Pricing
A foreclosed property normally has a lower price tag compared to purchasing a brand new house. On average, you can expect around 35% discounts from a median property price, which means a total savings of up to $77,000 or even more. However, the discounts tend to get even bigger in certain areas.
- Opportunity for Massive Returns
While there’s no guarantee that your purchased property is an excellent investment, most purchased foreclosures are. One of the reasons why investing in foreclosed properties is a good idea is because it provides you the opportunity to gain a massive ROI. When you purchase a foreclosure, the return on investment you can expect is huge, sometimes reaching up to 20-30%!
However, if you purchase foreclosures with the main intention of flipping them, then make sure you invest money on the remodeling and renovation of your property. A lot of potential buyers in the market already know what they should look out for when planning to purchase a flipped property.
- Closings are a Lot Quicker
If you’ve encountered tons of real estate closings that took forever, you might be surprised to learn that it’s the other way around when it comes to foreclosures. We both know how frustrating it is to deal with real estate closings that take too much time. This is another advantage of foreclosed properties.
Of course, there are certain factors and circumstances that will affect the time frame for a closing. One of them is the type of financing used for buying the foreclosed property. Since most foreclosed properties you can find in the market are purchased with cash, you can normally expect foreclosure closings to last only within 30 days after a house entered into escrow. Other factors that can affect a closing’s length include the presence of extra paperwork, title issues, and inspections.
- The Availability of Rehabilitation Loans
Lastly, you can avail of rehabilitation loans. Even some foreclosed homes that are in an almost perfect condition will need a bit of repair and improvements. Fortunately, the costs are covered by means of an FHA 203k loan provided that you need at least $5,000 worth of home improvements.
Foreclosed properties are an excellent investment as long as you conduct enough research. Some foreclosures have liens with them, although the massive discounts and rehab loans availability will give you the chance to renovate your newly acquired property on a budget.