A great way to invest into real estate is by buying foreclosures in Little Rock. However, it is important to know that it is very competitive! We have all seen the HGTV shows where investors can get the properties at way below market value, put some capital into the rehab, then put it on the market and make a large profit. There are five things you should know about buying foreclosures in Little Rock.
Inventory is Dropping
To begin, the first thing that you should be aware about buying foreclosures in Little Rock is that the ability to locate foreclosures has been more difficult than ever. The foreclosures that are available are getting picked up by investors everyday due to more competition and technology allowing cash buyers to locate these properties. Foreclosures in Little Rock disappear from the market quickly! We can help you locate foreclosures, give us a call at (501) 400-0505 right now.
Buying at Auction
Auctions are usually only recommended for seasoned investors with a large amount of capital to put into the purchase of properties. We do not recommend rookie investors to start at auctions. With properties purchased form an auction, you are not able to walk the property and do your due diligence. You are taking a risk but not knowing what condition or what repairs are needed on the property. This could result in a negative ROI.
You can still get a good deal on a foreclosure if it is bank owned (REO), but you may have to get into a bidding war and pay more than your maximum offer. This is because other investors and buying foreclosure very quickly and because of that you may have to come close to asking price to secure a foreclosure – not ideal for minimizing your risk. If there are multiple offers, you may have to offer higher than asking price and try to keep the contract contingencies to a minimum if you really want that foreclosure. Remember, there are a lot of factors to take into consideration such as the neighborhood, amenities, or other factors that could contribute to a foreclosure being more or less desirable.
Get it Inspected
It is extremely rare to find that the seller of a foreclosure is anyone other than the bank, so there is not a traditional seller to make repairs before closing. The bank will not likely fix anything wrong with the home. They are not in the Real Estate business, they are in the ‘making money business’ and the longer they have the property the more money they lose. The banks goal is to sell the property for as much profit as possible. Most savvy investors will include an inspection contingency in their contract that way they can have the property inspected and back out of the deal if they find the property will not make them a return. This also insures that you know exactly what you are getting in return if the bank decides to accept your offer.
Buying foreclosures in Little Rock may come with costs that you do not see coming with the property and in some cases can drive the total investment past the purchase price and closing costs. If the previous owner couldn’t make the mortgage payment then that probably means they weren’t able to pay the utilities, HOA fee’s or property taxes, home equity lines of credit (HELOC). You will become responsible for these unforeseen cost. Make sure you are working with an experienced and reputable title company and that they are taking these factors into account when preparing the title commitment.
When you buy a foreclosure always prepare for cost associated with cleaning and repairing the property as well. It is expected that the owner was not required to clean the property after being forced to leave and previous owners have been known to damage the property or steal from the property. Repairs to the home might also increase the assessed value and raise the taxes.