Foreclosure Homes

So you have decided to start investing in foreclosures? Fantastic! There is so much opportunity in this area that it is mind-blowing. Foreclosures are at an all time high, and they are climbing. People get stuck, and you can make a great deal of money helping them out.

There are a few things you should know before you jump in. Just like any other investment, you want to get familiar with the product you are investing in; in this case it’s houses.

To be a good investor, you will need to accurately gauge property values and repair costs. The market price or fair market value (fmv) of a house is determined by, among other things, recent sale prices of similar properties in the same area. Let's say you are interested in 500 Main St. and want to know the current market value. You need a source for comparable sales (comps) from the last 6-12 months. Realtors can provide Multiple Listing Service (MLS) comps for a given area, title companies can provide comps from tax records (though they are pretty much worthless)

Taking your list of comps, you drive by each property noting condition, size, appeal and location. Your last stop will be 500 Main St., the subject property. How does it compare to the comps in condition, square footage, lot size and number of bedrooms and bathrooms? Is there anything near the house that would detract from its value?

From your comps, you want about three neighborhood properties that closely match the square footage, bed/bath count and lot size of 500 Main St., your subject property. If those three are all pretty close in condition and there are no outside factors, the sale prices should be close together. Making any adjustments for size and/or room counts, the market value will be in the range of the 3 close comps.

So you have a house picked out and it looks like a pretty good deal. You should know what you are going to do with a house before you buy it. You should know almost exactly what it is going to take to fix it up and get it sold.

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