It’s Foreclosure Saturday! We have a standing appointment every Saturday to meet with our Real Estate Broker and look at foreclosures. We believe the real estate market is poised to take off and we want to be on-board the rocket ship! Therefore, we are always looking. When you think of foreclosures, you probably think of properties in poor condition, and sometimes they are … In this case, we are viewing a 3 bedroom 2 full bath and 1 half bath townhouse condominium that needs work. The common term for this property would be “fixer upper.” When we visit fixer uppers, we estimate how much work we have to do to get the property in condition to be rented.
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The kitchen is arguably the most important room in any home. This particular townhouse has an impressive kitchen. It has custom backsplash, upgraded cabinets, glass top stove, and Pergo hardwood flooring. It just needs a good cleaning, and the home inspector should verify that all appliances are working. Foreclosures are “as-is” purchases, but you can still have a home inspection performed.
The most interesting aspect of this townhome is the utility room in a below-ground room that we call the “dungeon.” It is a small, narrow room that houses the electrical panel, water supply lines, water heater, and washer/dryer. There are no windows or doors, other than the door leading from the main level.
We are concerned that a child, or even an adult, could become trapped in the dungeon!
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The 3 bedrooms needed paint and new carpeting. The bathrooms needed cleaning. Overall, the home was in decent condition, but as real estate investors, we have to think about safety and liability. The dungeon left us with an uneasy feeling, so we will pass on the Dungeon House!
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% -20% 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! In this case, a major bank owns the foreclosure, so there is no emotion involved on the seller’s part. We have learned that it’s best to deal with emotion-less sellers. When making low-ball offers, we don’t have to worry about insulting the seller. To learn more about negotiating real estate transactions, click here.
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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.