10 Biggest Mistakes When Buying Foreclosed Property: Part 2

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Mistake Number 6—Thinking Only Short Term

Since many foreclosed homes may decline further in value, it's important that buyer's approach the transaction from a long-term perspective. You need to view the piece of property from a 10-year time-span. By not doing so, the investor may suffer financial repercussions. If you are just trying to cash in quick on flipping the property and you are not able to do so, you may lose your initial down payment if you are not prepared for the long haul. Only Investors with the appropriate resources and patience for a long-term real estate investment may be able to afford a fully amortized fixed-rate mortgage.

Mistake Number 7—Buying More Than You Can Afford

With the level of foreclosed property inventory steadily increasing, it's relative easy for buyers to become overwhelmed. While the price negotiated for a foreclosed home may be significantly less than its value, many such homes may require substantial repairs. Buyers should be prepared to set aside an additional 10 percent of its price tag for repairs. You should not buy a home that may cost you more per month than 20 to 25 percent of their take home pay. With the relaxed lending requirements, people are purchasing more than what they can realistically afford. The goal is to own the home and not let the home own you.

Mistake Number 8—Dealing With the Bank

While buyers may be able to ascertain good deals on foreclosed homes, it's a mistake to assume that the bank will accept any and all offers. These financial institutions aren't set up to sell houses, and they typically outsource their foreclosed properties to real estate agents. In many cases, agents can receive listings in bulk nearly half the time. While these agents want to get the properties sold off quickly, they also want to obtain a good price for the seller so that the bank will give them additional business in the near future. Many people assume that just because the bank owns the property, that they will just give them half off the purchase price. Substantially low offers have the potential to thwart the negotiations. Make sure to present your wholesale offer case both in writing and verbally with the listing agent.

Mistake Number 9—Searching Too Broadly

Due to the fact that there is a wealth of inventory coming onto the current market, it's easy for buyers to become overwhelmed. Anyone in the market for a foreclosure should target a specific neighborhood and contact an agent with experience in that region. It's of utmost importance to tell the agent the types of houses you are specifically looking for. The agent will then be able to provide you with all of the listing that meet your requirements as they become available.

Mistake Number 10—Falling in Love With the Home

Some consumers are taken advantage of when they fall in love with the home. They are prone to accept any terms set out by the seller. Quite often, they will purchase the home and convince themselves that it just needs a small amount of work in order to make the property profitable. They think that they can perform all the necessary repairs by themselves, even though they have no prior experience in renovation or construction. Buyers let their "love" cloud their judgment and end up paying a hefty price for their myopic vision.

The Importance of Seeking Legal Assistance When Purchasing Foreclosures

Federal and state statutes govern all real estate transactions. Real estate law encompasses these laws in addition to property law matters. This includes a wide variety of legal issues relating to acquiring, financing, developing, managing, constructing, leasing and selling commercial and residential real property of all kinds.

In every real estate transaction, there are a number of legal issues that must be resolved. Real estate transactions generally have tax implications for those buying and selling property. These transactions often lead to disputes, which are best resolved by competent legal counsel. An attorney who understands the nuances of real estate law should review all contracts.

An experienced real estate attorney should be able to assist you with the following matters:

• Real estate and foreclosure laws
• Price negotiation
• Purchase agreements
• Real estate closings
• Title agreements
• Real estate owned properties (REO)
• Broker disputes
• Mortgage fraud

Investing in foreclosed properties is a complicated and document-driven process that requires a legal professional that is equipped to make solid decisions when purchasing foreclosed properties.