Bidding on foreclosures is riskier than making an offer on a property listed for sale by a private seller. The reason is because foreclosures are sold “as-is,” meaning the seller offers no warranty on the condition of the property. If the property has been vacant for awhile, problems can fester and grow worse over time. Typically, foreclosures are sold by the bank, Fannie Mae, or Freddie Mac. When we visit foreclosures, we estimate how much work we have to do to get the property in condition to be rented. Here are the 2 critical areas we inspect:
- Water Damage
- Termite Damage
Water damage typically shows up on the ceilings. When we spot water damage, we try to locate the source by checking the room above the ceiling.
In this case, the source of the water damage is under the kitchen sink. It looks like there was a leakage from the pipes under the kitchen sink.
To locate termite damage, we look in areas with exposed wood such as utility rooms, unfinished basements, outside door frames. We look for tracks leading up the wood. For our experience regarding termite damage in a townhouse foreclosure, click here.
This particular property was in fairly good condition. The townhouse needs paint, carpeting, and a good cleaning. The kitchen needed the most work.
All of the cabinet knobs were removed. The stove and dishwasher may need repairs. The master bathroom needs a major cleaning, especially the bathtub shown in the video below.
The lower level powder room and bonus room were in good condition.
When we view a foreclosure, we estimate how much it will cost to make repairs. We subtract that amount from the list price. Since we are assuming risk, we also knock off an additional 10% -15% from the asking price, depending on the condition of the property. We begin negotiations with the seller by making an offer. The first offer is a test to see where the sellers “low point” is. Once we receive a response from the seller, the negotiations begin!
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The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.