Foreclosed properties: benefits and pitfalls

In today’s real estate market, buying a foreclosed property is a very attractive option for many buyers, whether they are end users or investors. At J. P. King, we have been in business for nearly 100 years, so we have worked in every type of economy imaginable, and I, too, have learned a few things about foreclosed properties in my 30 years in the real estate auction business.

When it comes to buying foreclosed properties, there is one thing I need to make clear: The “auction” that takes place on the courthouse steps of a foreclosed property is a legal proceeding and is not for a novice real estate buyer. I will write more on this process in the future.

The foreclosed properties I want to talk about today sold by a lender or government agency that has completed the foreclosure process and has now acquired title to the property. The lender then markets the property, which are often called REO [Real Estate Owned] or OREO [Other Real Estate Owned] properties.

With most any purchase, there are pros and cons to buying one of these properties. The largest benefit, of course, it the potential for a lower price. REO properties can be bought for less than properties similar to it, even in the same location, than those sold by a developer. The lenders of foreclosed properties often factor the cost of carrying a home and the maintenance associated with that (taxes, insurance, risk of vandalism, etc.). Lenders are not in the real estate business, and, while they want to maximize their bottom line, they are also motivated to get the property off their books, allowing buyers to negotiate the price and favorable financing.

Some foreclosed properties, however, are sold as-is, which means you will need to inspect the property and be educated on its condition before making an offer. Foreclosures have often been neglected because maintenance can be discontinued long before the payments become delinquent. You should factor this into any offer you make, and a thorough inspection should be done so you know what you are buying.

Be sure to check our website at www.jpking.com to find some great values in real estate.

Hope to see you at the next auction!

Craig

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~ by Craig King on April 23, 2010.

One Response to “Foreclosed properties: benefits and pitfalls”

  1. […] business and the misunderstandings surrounding foreclosure auctions. I wrote earlier and touched on the differences between what we do and a foreclosure auction. I am not a lawyer and the foreclosure laws vary from state to state, but I will do my best to […]

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