Real estate investors often consider foreclosures as gainful investments. While this may be the real circumstance for savvy and knowledgeable investors, they can often carry a number of risks for less-experienced, first-time buyers. Alluring as foreclosures may seem, buyers need to educate themselves earlier in time in order to keep away from these five common mistakes.

Mistake #1- The Sticker Price.

While the price you negotiate for a foreclosed house may be significantly less than its value just several years back, many such homes often require substantial repairs. Even if a home is only a few years old, it can deteriorate quickly. So, unless you are planning on making these repairs on your own, be prepared to set aside an additional 10 percent of the acquisition price for potential labor costs. It’s important to keep these repair costs in mind when negotiating, so you do not end up foolishly over-investing in a foreclosed property.

Mistake #2- Waiving The Home Inspection.

Foreclosed properties are often advertised “as is” with higher discounts offered to buyers willing to ignore a home inspection– something (for motives stated in Mistake #1) a buyer is never suggested to do. Often such homes are neglected by owners who stopped caring about their home as soon as they stopped making their mortgage payments. Inspections on many foreclosed properties usually reveal leaky or damaged roofs, decomposing foundations, malfunctioning plumbing, electrical, and mechanical and heating arrangements, mold and radon contagion and termite plague. Without having an experienced home inspector examine these components methodically, a buyer could inherit a much larger and costlier repair job than expected.

Mistake #3 – Flipping.

With many foreclosed houses expected to deteriorate significantly in price in the near future, you have to think of a foreclosure as a long-term, rather than a short-term, investment. If you are just attempting to cash in on a quick flip, a foreclosure is not for you. Only investors with the financial resources and endurance for a long-term property investment and homeowners who can afford a completely amortized fixed-rate mortgage should consider buying a foreclosed property.

Mistake #4- Location

Inexperienced buyers often assume discounted prices obtainable on foreclosures will compensate for a location in a less attractive neighborhood. As with any other kind of house purchase, your search should always center on the worst homes in the best location, to ensure yourself of the uppermost resale value in the future.

Mistake #5 Cloudy Title.

If you find a foreclosure house you like, request a title investigation be done immediately to ensure there are no liens on the property resulting from such debts as unpaid mortgages, home equity loans, or unpaid property taxes. These judgments often include late fees and other fines, and must be satisfied before the property such as Bank Homes Florida can be sold.

We are the Cheap Florida Home real estate agents in Florida committed to helping and informing property buyers, Investors properties and sellers.