The Difference Between Buying A New Home And A Foreclosed Home

Many people are of the belief that the best real estate investment lies in foreclosures. While there is no question that one can find some exceptional deals in foreclosures this does not necessarily mean that buying a new home cannot offer some of the same if not better deals. There are pros and cons for each argument and it would be well worth your while as an investor to understand both sides.

Buying a New Home

The obvious caveat of buying a new home comes with the warranty protection that you will get. New homes have this added protection in the event that something goes wrong with the building that is a result of inferior materials or poor construction workmanship. New homeowners have the luxury of knowing that they will not be responsible for out of pocket repair costs if something were to happen.

Those who choose to buy new homes also have the advantage of better financing options. Some incentives set in place can save you thousands of dollars off the total cost of buying the property making it that much easier to secure adequate financing for the home of your choice.

Finally, when purchasing a new home you can often work directly with the builders to get the home you really want. If you begin the deal early enough you could customize certain features of the home; choosing the right cabinets, floors, and space design well before the home is completed. This means that you can end up with a home that will reflect your personal tastes and personality.

Buying a Foreclosed Home

By contrast purchasing a foreclosed home may get you lower prices overall but you also have to make some sacrifices in the process. There are a number of risks and challenges that come with purchasing these types of property. For the most part these homes come “as is” leaving you with no warranty or protection if something goes wrong.

In many states by law, any home set for resale is required to come with a “full disclosure” clause that should clearly point out any particular problems that the property must have. However, with foreclosures this is not the case so the buyer leaves himself vulnerable to any number of difficulties and challenges that may come along. If something were to happen the buyer has no possible recourse if problems are found later on.

Finally, there are always the many financing challenges that may come up. While you may have the luxury of securing financing after you’ve found the home of your choice, it is strongly recommended by many realtors that you secure your financing well-before you begin your search for the foreclosed property. At the very least this phase must be completed before you begin the bidding process.

There is no way to tell anyone which real estate investment option is the right one for you. Your decision will depend on your personal expectations and circumstances. However, understanding the common misconceptions that come with investing in real estate is a major step that everyone should take to make the transition to home ownership much more attainable.

Practical Tips For Investing In Short Sales

When you’re a homeowner and you’re facing a foreclosure it can be a very unpleasant circumstance. You’re probably thinking about all the hard work, time, and money you’ve invested in a property that you feel you are forced to surrender. It can be a sad time as you look at your prospects. However, if you’re a buyer of a short sale property things can look very different. Looking at the deal from an investor’s viewpoint allows you to see high potential in taking advantage of this possibly lucrative opportunity. Still, there is always a possibility that things can go wrong so when you’re ready to enter a short sale transaction here are a few tips that will give you better leverage and a higher chance at success.

Be Thorough

It’s true that the lender is willing to take a loss but that doesn’t mean that they’re in a position where they’re forced to accept what you have. Make sure that when you place your offer for the property that you have submitted everything the lender has asked for. Keep in mind that it is not the seller that you have to impress but the lender who is trying to recoup as much of his losses as possible. The more thorough you are in the details provided to the lending institution the more likely they will give you the attention you deserve.

Know the Current Market Value

Before you make any type of proposal you should be very clear on the current market value of the property you’re considering and design your offer to be within a reasonable amount of its present value. Your first offer will tell you whether or not it’s in the right ballpark. If after your offer is presented the lender asks for an appraisal of the property you are on your way but if they come back asking you to raise your offer you know you’ve missed your mark and further negotiations may not be so forthcoming.

Be Prepared to Close

If your offer is accepted you need to be prepared to close immediately. There should be no reason for you to have to ask for extra time to pull your assets together. Closing within 2 – 4 weeks is a reasonable amount of time, anything over that may not be easily accepted and asking for an extension may put you in a bad light in the sight of the lender. If this is your only property that you plan to purchase then maybe it’s okay if the lender is a little annoyed but if you plan on using the property as an investment tool and expect to put it on the market for resell anytime soon a delay in closing could lead down the line to more problems.

Short sale properties can be an ideal opportunity for a savvy real estate investor but it does require a little forward thinking and careful planning on your part. With a little persistence and patience you will be well on your way to a future as a real estate investor for just a small fraction of the price you would normally expect to spend on the property you choose.