To start the research for depressed homes, check the real estate market for foreclosures or homes at auction. This takes a great deal of research and careful consideration. Read, read, read Internet and other news resources about the process of buying homes that need repair or renovation. Be wary of web sites, T.V. commercials or other ads claiming to sell list of depressed homes. Stay local or have travel accessibility to investigate homes before making offers.
Keep Accurate Records of the Search
Choose a Realtor for personal representation. Be a good listener and be ready to take expert advice. However, don't leave all the work up to the professional.
Keep a running journal of all details of every home considered and actions taken. The journal should contain the addresses of homes considered, when the home was viewed, name, address and phone number of Realtor, asking price, damages, probable cost to bring the house up to code, township and area information.
Inspect Each Home Carefully
Never, never, never consider buying a depressed home while there are still tenants. It limits your ability to inspect the home and previous owners or renters will without doubt trash and destroy the home before leaving and after sale.
Have a Realtor give more than one tour through the house before the offer. Make sure there is enough lighting to see every detail, especially in the basement. Carry a heavy duty flashlight. Make notes in the journal of missing plumbing and other essentials such as hanging wires, visible damage to furnaces or water heaters if they exist.
Water damage or pitted, decaying wood on the under beams or visible on ceilings can indicate mold or termites. If there is electricity, turn on and off switches. Check for hanging wires or flickering lights.
If a home is listed as a bank owned or HUD home, research the township or city tax records and enter this into the journal. Note: HUD homes are FFA foreclosed properties that have been bought by HUD for resale. Expect more red tape and perhaps longer wait times in dealing with HUD.
If a home has been narrowed down to one, have a professional inspection done or have an expert walk through the property and give a rough opinion of what it will cost to repair or renovate a property. Enter all numbers into the home buying journal and add it to the asking price for the home.
Obtaining Financing
Even with inspections, calculate for extra unexpected cost that cannot be determined before sale.
If the home can be bought at a profit to the buyer, there are options for obtaining the money.
- If your credit score is high, obtain a personal loan at a higher interest rate and offer cash. In an auction this may be the best option. In addition, buying on a personal loan keeps the home free and clear of liens.
- If a personal loan is not an option, offer a little more than asking and consider applying for an FFA loan that can offer additional money on the loan for repairs. These loans are usually for no more than 3 to 4%.
Resources
Buying a Home by US Department of Housing and Urban Development - HUD
Clarice Cook - Sharing life experiences, education and professional expertise combined with extensive, thorough research of accredited resources.
