Bargain or Money Pit?

Some tips on helping you see the real deal…

I recently watched the movie "The Money Pit", - the one where the couple is renovating a house they bought at a bargain.  If you haven't seen the movie in a while, here is a clip of some of the troubles the couple encounters.  While the movie is funny, very funny at times, it is also a cautionary tale for realtors and clients looking into purchasing foreclosed and short sale properties. Is the property a deal or a hidden horror?

View the Home and Neighborhood

Take a close look at the home, as well as the surrounding neighborhood, to get an idea about insurance and repair costs. By viewing the home up close, buyers can set a more informed budget that not only includes the final cost of the home, but also how much upkeep and maintenance will cost them in the end. Try to determine how long the house has been vacant and whether possible damage or deterioration of the home may have occurred during this period. For example, homes that have been neglected during the winter months may have incurred water damage or other types of costly issues, so it's important to be prepared for these types of things.  

Most of the homes are sold strictly "AS-IS" with no information provided about the age of structural or mechanical components (ie. roof, foundation, heating & cooling, etc.)  If you are interested in buying a home in need of obvious repair and don't have experience doing major renovation yourself, consider viewing it again with a contractor who can give you an estimate on what it will cost to get the home in the shape you need and want.  

Further, it's imperative to conduct research and do a walk-through of the neighborhood. The health of a neighborhood - including crime rates, average income and the condition of surrounding homes - may have an effect on overall property values, making it crucial for potential buyers to secure all the information they can in order to make an informed decision.

Hire an Inspector
Once you've decided on a property, don't skimp on the cost of an inspection.  Inspectors seek out possible problems or damage that may not be visible to the naked eye, such as structural problems or piping issues.  Experts encourage potential buyers to enlist the services of a professional. An inspector will charge between $400 and $600 to thoroughly review the property, but long-term savings will be invaluable.  Issues you don't want to tackle may be uncovered during a home inspection thus saving you the time and expense of owning a problem. Your real estate agent has resources that can help you choose the right inspector for your needs.

Don't Go it Alone

Choosing to work with a Realtor experienced with short sales and foreclosures can provide you with information on how the process differs from a traditional property sale, keeping you informed about the various stages of the transaction. A Realtor familiar with the neighborhood can also provide valuable information about the community, typical property conditions, and comparable sales.  

Foreclosed homes & short sales can be appealing to homebuyers who are working on a budget and seeking out more affordable properties. Being educated on the process and working with professionals is the only way to stay away from trouble. It's important that you get all the information about the property, the neighborhood & purchasing process before making an offer. And above all, keep asking questions – it’s the only way to know if the “deal” is a bargain or a money pit!