Investors Beware: Use Caution When Buying a Distress Home

There are many reasons why a distress home is on the market. It could be a divorce or death in the family. It could be a matter of poor financial management. Whatever the reason, it does not matter. What matters is protecting yourself when approaching the seller of a distress home.

Many rules and regulations have been implemented to protect the seller of a distress home. Just because it is legal in one jurisdiction does not make it legal in every area. You can safeguard yourself by becoming familiar with the laws in the area where you are planning to invest. You should know what rights the seller may have.

In some cases a distress home goes to a sheriff auction because of back taxes. You can generally pick up these properties for two thirds of the appraised value. This is great until you realize the owner may have six months to claim his or her property back by reimbursing any money paid. This means you cannot sell or structurally alter the home for six months.

Certain financing options may not be available for a distress home. As an investor you should always have three things on hand. One is a contractor or appraiser for inspections; two is a qualified real estate agent and three is a good mortgage broker. These three people can keep you from losing your shirt in a real estate deal involving a distress home. They are required to keep up with local laws as well as federal regulations and codes.

Another reason you should use caution when buying a distress home is vandalism. Some sellers are not happy about moving out of a home that has been in the family for years. There is no telling what they may have done to vandalize the property before you take possession. Horror stories pour in all the time about cement poured down drains, holes put in roofs and floor joists being sawed through. This may seem like a far fetched scheme, but it does happen. When buying a distress home, it is definitely a buyer beware scenario.

Buyer beware can make even the most strong willed person cower. The reality of the situation is no one who is in possession of a distress home is going to tell you everything wrong with the property. You may find a home on the market which has been listed with a reputable real estate broker. The sellers are highly motivated because the bank is threatening foreclosure. This means they are most likely willing to look at any and all offers. What this does not mean is they are going to tell anyone, including the listing agent, problems which may keep the house from selling. This could include a bad furnace, flooding basement or cracked foundation. This is why the three key people in your investment business include the contractor.

The most important thing you can do to protect yourself when investing in a distress home is know the laws and have it inspected. Take heed of this advice. You will be glad you did.