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Buying Foreclosures Can Be Risky

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By : Richard Merlini    99 or more times read
If you listen to all the professional financial advisors of the world, they will tell you that you can make money in any market. Whether business is booming, or it is falling, there is always an opportunity to make money. The fact is some of the richest people in the world have made most of their wealth in down times.

Some say to stay out of the real estate market because it is too volatile. Some say it is the perfect time to start buying foreclosures. After all, properties that are foreclosures are often times sold by banks for a fraction of their full value. With the real estate market somewhere near its probable bottom, this is a good time to stock up on investment properties at a cut rate.

It is enough to get a would-be real estate tycoon excited. And it does! Encouraged by those who advocate foreclosure purchases (and who are often selling guides or putting on seminars to teach you how), many novice players in the real estate field are gambling on bank-owned homes.

Is buying a foreclosure a good idea?

In some cases, it probably is a good idea to buy homes that are foreclosures. There are some great bargains out there. There are also some dogs with those great deals. Just because they are foreclosures does not mean they are a great deal. What can make a foreclosure such as great deal is that, if you purchase the right property, it could turn into high-margin moneymakers for you within a year or two.

Those success stories, however, are tempered with some very disturbing tales of purchases that were disastrous. Buying a foreclosed home comes with a special set of risks and may not be an appropriate investment for those with little or no experience in the field.

Maintenance nightmares

There is the question of upkeep, of course. This is a serious issue with foreclosure properties on multiple levels. First, by the very nature of the situation, you are dealing with a property that was maintained by someone who was unable to make mortgage payments. It is not a stretch to imagine that maintenance concerns fell by the wayside when the owner was not able to make his or her payments.

Second, the banks that hold foreclosed property do not have that old “pride in ownership” thing working for them. Banks are property managers and they often allow foreclosure properties to slip in terms of care and maintenance. By the time a home is “up to snuff” it may no longer be a bargain.

The ugly economy that has contributed to the rash of foreclosures we have seen adds another risk to the purchase process. Many homes are partially, (or completely), gutted by owners during the foreclosure process in order to raise money.

There are homes in which floors have been completely removed, cabinets have been torn from the walls, and even kitchen sinks have been yanked out and sold. These owner-gutted properties often do not turn out to be a great bargain after the new owners handle necessary renovation and repair.

Foreclosed homes are generally sold “as is”, meaning that the buyer assumes a great deal of risk in the transaction. An example of this is the story of a couple who bought a foreclosure only to discover that it had a serious mold problem. A lawsuit ensued, and this foray into foreclosure-land failed to turn into a profitable investment.

Look before you leap

What makes buying a foreclosure so difficult is the fact that you first need:

  • An Expert in the Real Estate field to find them.

  • An Expert in the Building Industry to tell you what wrong with them.

  • An Expert in the Mortgage Industry to get you the money, which in these times is very hard.

  • An Expert you can trust to advise you on whether it is right for you.

So my advice to you as a prospective buyer of a foreclosure is:
“Do your research and where you feel that you may need help, go out and get the best help possible!”

Remember, you do not need to know everything; you just need to be smart enough to hire someone that does!
Foreclosure Made EZ put all 4 Experts you need together to make buying foreclosure properties easy. Working outside of Southern Michigan, this company recognized the problem that the consumer has been facing and solved the problem. For more information, visit

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