Housing markets in America are rebounding fast. This is quite evident if we take into account a steep drop in the number of properties going through foreclosure each year. 2014 wasn’t an exception as only 643,193 U.S. homes entered the foreclosure process, according to some reports, a drop of almost 70 per cent compared to the number of homes that lost to foreclosure in 2009.
The trend is exactly the same for Middle Tennessee, particularly Nashville. There are fewer distressed properties on the market today. Distressed properties are often considered bargain buys, but the lack of such properties has created a competition, meaning that there are more buyers in the market and fewer distressed homes to purchase.
Well, what does this news mean for property buyers or investors looking to buy a distressed property? The lack of inventory may push many buyers to rush into decisions and that’s’ where they need to be cautious. Whether you are an investor or a regular buyer, here are a few mistakes you should avoid while buying a distressed property in Middle Tennessee:
You don’t hire professional help
If you don’t have a prior experience in buying a distressed property, you must hire a professional help, particularly someone who have worked with buyers of this type of real estate. There are several obligations – legal, financial and otherwise which makes the process of buying a distressed property a lot different from the traditional home buying process. If you are buying for the purpose of investment, you need to consider several factors such as the real estate trends in the neighborhood where the property is located, an estimate of the return on your investment (ROI) etc.
Another reason as to why you need professional help is that foreclosure sales are heavily regulated and every state has its own sets of laws. You need a legal advisor or at least a person who can ensure that the language in the contract protects your interest if something goes wrong.
Not being able to realistically calculate repair costs
Distressed properties are generally in a very bad shape due to years of neglect and poor maintenance. The sales price may be comparatively lower, but you need to take into account possible expenses on repairs while calculating the total property acquisition cost.
You are not able to seal the deal quickly
Due to the lack of distressed properties on the market, you will likely compete with other buyers who would even offer cash if the property is enticing. If you can’t pay cash, you should at least be pre approved and have your finances in order, so that you are able to close the deal quickly if your offer is accepted.
You don’t set a long term investment strategy
There may be some improvement in the property sector recently, but remember that markets are still volatile. So always think in the long term, keeping in mind the fact that the values may drop further temporarily. Buying foreclosure properties are often considered a risk when your purpose is to flip or resale it in the short term. So evaluate your financial situation properly and then determine if you will be patient enough to wait if the market took a turn for the worse.
Avoid these mistakes to minimize the risks and maximize the gains while buying a distressed property in Nashville, or anywhere else in America for that matter.