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I have been wanting to address a couple of Foreclosures Myths with many of my Buyer Clients. 

The first and most important myth, and I believe it’s perpetuated by the media, is that there is some magical place where you can show up and claim you great foreclosure deal.  The reality of the situation is that you will have to subscribe to a foreclosure list, research and identify multiple properties that are possibilities, and then hope at least one of those homes makes it to the auction on the courthouse steps.  In reality, only savvy real estate investors have the time, know how, and patience to do all that, not a normal Buyer.

The second myth is that foreclosure=deal.  Buying a foreclosure can be a good deal if you’ve done your homework and know about the property, but it’s what you can’t see that is going to make or break you.  If you are not an inspector, you will need to hire one ($300 to $400)  to go to each foreclosure and assess it’s condition.  That can sometimes be difficult too when there’s an owner or tenant still there that’s not too keen on letting you in.  Also, if there are repairs to be done, do you know how to estimate those costs and factor in to your bid? 

I’ve seen stats that state only 10% to 20% of the homes listed for foreclosure will make it to the courthouse auction.  If you’ve identified and researched 10 properties, you may only be able to bid on 1 or 2, and you better hope that they are not listed with different trustees at the same time at the courthouse.  If they are, you can scratch another one off your list.

Please check back to see my next post on Why Foreclosures are going to help you even though you aren’t Buying one.