3 Common Mistakes when Purchasing a Foreclosed House

Many investors make mistakes when purchasing a foreclosed house. Purchasing a foreclosure can be a great way to realize a fantastic return on your money if you do it correctly. However, doing it the wrong way can end up costing money and a lot of time in the process. Making the right choices when purchasing foreclosures can be the difference between success and failure. Here are a few common mistakes that people make when purchasing a foreclosed home.

1. Paying Too Much

Many people believe that just because the house is technically a foreclosure they are sure to get a good deal. This is not necessarily true. Some banks price their foreclosures at market price or just barely below it. When you buy one of these, you may not be able to realize the return you hoped for. Sometimes you will be lucky to get your money back out of a property like this. You want to look for the deals that are priced well below market value. This way, you will have built-in equity in the house from the moment you purchase it.

2. Overlooking Big Problems

Many investors want to get involved with a foreclosure so badly that they overlook big problems with potential properties. This could be one of the biggest mistakes you can make. Many foreclosures are in terrible shape when they are sold. While some repairs are to be expected, you don't want to get in over your head. If there are foundation problems, for example, you could spend thousands of dollars and still never fix the issue. Toxic mold is another common problem that investors try to take on. Mold is one of the hardest things to get rid of after it gets in the walls and spreads. You will have to hire a mold remediation company and may end up rebuilding most of the house. You can not realize a profit when you take on big projects like this.

3. Trying to Do Everything Yourself

Another very common problem is trying to do everything yourself. The best way to tackle a foreclosure is with a team of people. You need to develop a network of people around you if you are going to succeed consistently in the foreclosure market. You need a good real estate agent that can alert you of the best deals before they go on the market. You need a good lawyer so that they can help you navigate the contracts. You need a great handyman so that they can facilitate the necessary repairs on the property.

If you are busy doing everything yourself, you will miss out on the best opportunities. You can't just do one foreclosure and expect to do well for yourself. You will have to do it again and again. Many times, you will need several properties going at once. If you are busy painting the house, you won't be able to get out and look for the good deals.