What is the catch with buying a foreclosed home?

Question

just wondering why their so cheap, if its a good idea to buy one than fix it up and sell it

Answer 1

the catch is that it will continue to go down in value, so it's a bad investment.

even if you get lucky and manage to sell it, you won't probably see any profit in the next five years

Answer 2

I agree with the fact that you can fix and sell in this market.

I do not agree with a place would need a lot of work.  I bought my house last year for $17K. It is almost 100 years old and the only work it needed was a new furnace. Everything else was decorative.

People let houses go foreclosed now a days because they had an ARM and they couldn't afford the payments or they didn't pay their property taxes. They just walked away from the house. If you want to buy a house to live in, now is the time.

Answer 3

Foreclosures have a tendency to need A LOT of work. We recently bought one that was in GREAT condition, and we had to repaint the entire interior and have the carpets professionally cleaned. We still need to replace the carpet in 2 rooms because of stains, but that can wait.

Many that we looked at were in much worse condition. One didn't even have a kitchen sink. When the people who lived there left, they pooped in every toilet and did not flush, punched holes in the walls, ripped out all kitchen appliances and cabinets, sinks, knocked out a window, and left a general mess. A friend of mine looked at one that had all of the pipes ripped out of the walls.

Get a realtor and know your fix up budget once you get in there. Some are so messed up that it is not worth it.

Also, if you are looking at it as an investment, your interest rate will be higher. We had to sign an affidavit stating that we would move in to the property within 60 days and live here for a minimum amount of time as our primary residence to get a good rate.

Good Luck!!

Answer 4

Takes a fair amount of money - probably 20% (10% if you are going to flip it) down plus fixup, closing costs and holding costs.  Then with the market as soft as it is its hard to sell it for a profit considering how much $$$ you put into it.  If you rent it and buy well (and live in an area conducive to this) you can make a great cash flow, but its alot of work, and short term your investment (including the rents) can certainly go down though long term it has to go up, due to inflation, but long term is no help when you can't pay the bills.  Generally this is a good idea for the right property but it isn't easy and you better know what you are doing.

Answer 5

Lenders lose money every month forclosed houses sit vacant. The lender's main concern is to recoup their money. They are not in the business to make money from taking homes back and reselling. Therefore, you can get some great deals.

If you have a house and want to sell it, you have to sell at a low enough price to compete with the current market price of all the other houses in the area.  Since  there are so many     preforclosures and forclosures that are priced to sell fast, you either sell at a comparable price, or let your house sit on the market and pay the monthly mortgage rate while hoping someone will like that house enough to pay what you want for it.

Right now is the perfect time to invest--to buy a house and rent it and wait for the market the improve.  Then when it does, you can sell the house, or you can hang onto it and sell it when you retire. To go even further, lets say you were going to buy 5 houses. You could rent them out until you have enough equity to pay for one whole house. At that point, you sell four houses and pay the fifth off. It's a win-win situation for you. Buy low, receive rent, resell later in a good market.

Answer 6

The catch is that you can't fix it up and sell it in this market.