As you have seen in the newspapers, many websites, and on the evening news the foreclosure rate in the Toledo area is very high and still climbing. Many people read about or see on TV how you can get foreclosed homes for next to nothing and have instant equity, or for minimal work fix them up and sell them for a profit (commonly called "Flipping"). People also read and hear about people getting in over their heads by buying a foreclosed home that needs more work than they ever imagined. So that leaves us with the question: are foreclosures a deal or no deal at all??
The answer to that quesiton is the always loved, it depends. The truth is, regardless of what the TV or national news says, is that some are and some are not. Foreclosed homes are like every other home on the market, some are overpriced, some are underpriced, and some are priced just right. They also vary in condition from move in ready to rebuild.
So how do I know if a foreclosure is a good deal or not?
The same way as you know if any other home is a good deal or not. You must examine the neighborhood sales and the condition of the home. Foreclosed homes are usually discounted for the amount of time they have been on the market, and for the condition of the home.
The rule I use is that if you find a foreclosed home that only needs cosmetic work in a good neighborhood then you have likely found something good. There is still some work left to do to figure this puzzle out though. Work with your Buyers Agent to examine the sales of the neighborhood to see if it is priced right, or what the right price should be. Then we move onto inspections.
Without a doubt you should always have the home inspected by a professional home inspector, period, no ands ifs or buts! Some foreclosed homes sit empty for years before they go on the market which can lead to problems that a trained professional can spot better than the average home buyer.
Once you have done all your research and had your home inspection you need to decide if the home is worth the work. Most foreclosed homes are going to need some work done to them to bring them up to your satisfaction. You must know what work you are willing to do, and how much you are willing and able to spend for supplies or for work to be done by someone else.
Here's an example: A foreclosed home's asking price is $100,000. You estimate that it needs $10,000 worth of your time and work put into it to be brought up to your standards. You estimate that the homes value would be around $125,000 when you complete your repairs. This would net you $15,000 worth of equity in the home. You must decide if that $15,000 of equity is worth the $10,000 worth of money, time, and effort you would need to put into the home. If it is, then you have yourself a deal. If it's not, then you don't. It's that simple.
Just remember the main rule for foreclosures: Do Your Homework First! If you do your homework up front (researching values, inspections, estimating costs, etc...), know what you are willing to do, and stick to your plan then you will be happy with your decision on whether a foreclosure is a Deal or No Deal.