The real estate market these days has many people thinking about purchasing foreclosures and short-sale homes, and they are purchasing these homes for personal use, rather than “flipping” the homes. Even with the seemingly large supply of move-in ready homes on the market there seems to be a lot of bargain-hunting going on, and bank-owned homes can be real bargains. If you or someone you know is looking at homes there is a very good chance that you have looked or will look at a bank-owned property.
With every good deal there are always some hidden items that need to be addressed. First of all, finding the bank-owned house that meets all of your criteria can be a bit of a task. Then negotiating an agreeable sales price and date with the lien holder(s) can be difficult. Lastly, the financing can be a real hurdle, especially if the home needs a significant amount of repairs or updating to meet your needs. None of these items can be taken lightly, and all of them require the right amount of guidance from seasoned professionals to make the process as smooth as possible.
Once a home has been found that seems to match most of your criteria, the next most critical step is determining what remodeling or repair work needs to be done to get the house into move-in condition. Even brand new homes that are being auctioned off generally will have extra costs associated with them for deferred maintenance or items that the original builder did not finish. The whole rest of the process of purchasing the home hinges on this one step, for without developing a cost for construction there is really no way to make an informed offer to purchase the home.
To determine the cost of the repairs sounds simple; just call a couple contractors and get some estimates. Sounds easy enough, right? Not exactly. The best way to go is to get the home inspected by a reputable home inspector, and preferably one who is experienced in building science, meaning they can distinguish between cosmetic issues and real problems. You should let the inspector know what your plans are for the home so that he can build his inspection around your intended remodeling or updating. If the house has any cracks of appreciable size or unknown origin I would strongly advise that a licensed structural engineer be brought in for an inspection. Your home inspector, unless licensed as a structural engineer, cannot advise you on how to correct structural deficiencies, so it is very important that if abnormal cracking is seen in foundation or sheetrock walls that a structural engineer be called in for a separate inspection.
With the inspection(s) complete it is now possible to move forward with the cost estimating. Determine what items you will fix, what will be updated, and what will be remodeled entirely. Also, will you be performing the work yourself or will a contractor be involved? That is a question that only you can answer, but it needs to be decided at this point, and if there is any question about tasks that you may or may not perform yourself then for now plan on having the contractor take care of them. This way you will lessen the chance for budget surprises on down the road. Using a contractor may be the right move for you, and if it is then the time is now to quickly get the estimate for construction put together. Be careful to work with a contractor that is well-versed in home remodeling and renovation, and be sure that they are very detail-oriented. Remember, the offer you make will be based upon what the estimated cost of construction is, and once you have an accepted offer there are no “do-overs”.
Following a good process and relying on experienced professionals can allow you to make the right purchase, and customize the home to your liking without breaking the bank. For personal use or investment, purchasing bank-owned property can be an excellent investment. For more tips on purchasing foreclosures check out The safest ways to buy foreclosures.