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Don't Make This Foreclosure Mistake 

What's the Biggest Potential Pitfall When Buying a Foreclosed Home? It May Be Paying Too Much! 

The following video (1:31 minutes) is about what is arguably the greatest potential pitfall for a homebuyer when purchasing a foreclosed home. Many foreclosed properties need substantial and expensive work to get back into livable condition. 

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The following is the transcript of the video above about the biggest potential pitfall of buying a foreclosure property.

Rick: We’re going to have to take another break, but before we do, we’ll make it difficult for you. In a minute, or a minute and a half, explain the major pitfalls of buying a foreclosed property. A lot of people think that’s a great way to go and it really – for most buyers who want an owner-occupy property – it isn’t the way to go.

Rich: I can tell you in my experience the biggest pitfall is they’re really not worth what people are paying for them. There’s this idea out there that, “It’s a foreclosure. It must be a good deal.” In my experience the amount of work that most of these properties need, it’s not worth it.

Rick: You need very deep pockets to do it.

Rich: What I always say to people is a house might be in a $400,000 neighborhood, and the foreclosure’s listed for $350, and people say, “Look, we’re in a $400,000 neighborhood. That house sold for 4. That house sold for 4. This house is listed for $350.” Then you go in there, and I start pointing out to them, “That needs to be replaced, and that needs to be replaced, and now we’ve got $70,000 worth of work to do,” and so now you’re not really getting a deal. They’re thinking, “I have 50,000 in appreciation right off the bat,” but in fact they’re probably behind the 8 ball by the time they do the work. The other thing I tell clients, "it doesn’t matter how good of a deal you get. If you don't have the cash to do the work, you’re going to be living in a house you hate forever."

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