Mike Adams-Internet Real Estate Marketing Pro

Everyone  has heard that buy a HUD or Foreclosed property as a real estate investment  can be a great idea, with high potential return on investment.  This is true in most cases.  There are pitfalls and potential problems that must be examined first and during this process to minimize the risk.  Here is how the process  should work for you.

First find an agent that has closed a transaction in your category.  That is to say find an agent that has closed  a sale on a HUD or foreclosed property. Not all agents have, in fact it would be safe for me to say most have not.  Experience in this area is GOLDEN.  There are deadlines to meet,  more paperwork than a regular sale, and problems that can and will develop as the  sale comes to term.  In almost every case HUD or the bank will not fix any problems that develop and  the buyer will need good advise on how to proceed.

Second find a loan company  and get yourself  pre-approved for a loan.  Find out if they do 203 K loans.  ( A 203K is a rehab loan, and it is most likely the type of loan you will need.)

Third locate several potential properties.  This can be done on line.  In the case of HUD home there should be an inspection report available for you to download an read about the home.  This inspection report is at best cursory  and if you decide to make an offer be sure to include an escape clause in your offer to the effect that it is pending a professional inspection.  A professional inspection  is a must when thinking about these type of homes.  You have to know that there will be many things wrong with these homes… deferred maintenance… vandalism… frozen pipes….  and a host of other issues that you would not normally find in a prospective home.  Be sure your Agent has a list of Contractors that can  give bids on repair fast.  Once you have located your prospects , and conferred with your agent about  some they may have uncovered that you missed  it’s time to go look at the house with your note pad in hand.

After viewing the houses’  review your notes.  Do some math, including your agents estimate of what the home should be worth when fixed up.  ( Remember your agents is making an  educated guess here, and is not providing you with a written price opinion or an appraisal)  Make your offer based on all th facts at hand and  wait to see if it is accepted.  There are different time frames involved here so you agent will be the most help in keep a watch for you.

When you offer is accepted, the clock starts ticking.  You  and you agent will have to get you inspection and appraisal fast, and make your final decision based on that firm information  if you want to continue  with this project or find another offering.    If you decide to continue on you must get your estimates and get them to your loan company.  They will need this to get their paper work done.  Remember, you will have to hire all work done, as the 203K will not let you be the contractor unless you already are one.

Of course the is more to the whole process , but that is why you spent time looking for an experienced Agent.