#1 Rule When Buying a Foreclosure

Foreclosures are the “hot topic” in the news today and every wealth guru is telling their students that now is the time to buy a foreclosure.

For the most part, I agree, foreclosures are a fantastic way to find great deals. However, before you run out and buy one, it is imperative to remember  1 rule.

Just because it’s a “foreclosure”, it does NOT mean it’s a good deal.

Let me repeat myself in case it didn’t sink in…

Just because it’s a “foreclosure”, it does NOT mean it’s a good deal.

Sounds easy enough but it amazing how many new investors I’m meeting who are willing to sacrifice due diligence and solid fundamentals just because the property is called a “foreclosure” or “REO”.

Cut through the media hype on these over played terms. It’s just a house that is owned by a bank and just like other sellers, the bank is using a realtor to resell the home. And……like other distressed sellers, a bank will sometimes try to list their home for a high sale price hoping that someone will bite.

So don’t bite!  Do your homework first!  Know your #s and be sure to have a clear strategy that you are confident you can execute. This is crucial.

I promise you that the word “foreclosure” will not save you if you buy a major fixer-upper but have no idea how to get it rehabbed! And the word “REO” will not save you if you overpay for a property.

Keep in mind, out of every 10 foreclosures I look at:

5 houses are total dogs and priced too high

3 houses are “ok” deals but not great

2 houses are really good and worth my time and effort so I will probably make an offer

* And I rarely give the bank what they’re asking for.

Low ball them! Remember they are a distressed seller.

Now is the time to make money! But move forward slow and steady to have the most success. And keep your emotions on the back burner! Listen to the #s, not the fancy words.

~Jim Sheils