The Ugly Truth About Foreclosed Homes

For anyone who has ever been looking for a home within a tight budget, you may have had the opportunity to consider a home that went through the foreclosure process.

The length of a foreclosure process varies by state. In Pittsburgh and the surrounding areas, a lender must use the judicial foreclosure process because that is Pennsylvania law. The judicial process in Pennsylvania reportedly takes 90 days.

Purchasing a foreclosed home isn’t always a bad decision. You can often find diamonds in the rough at a low price. If the home is in the pre-foreclosure stage, you could get it through a short sale. If a bank is motivated to sell the property quickly, that could be a good negotiation tool for you. It is also a plus that you won’t be responsible for any liens or back taxes from the previous owner since the home’s title is cleared.

Dangers of Purchasing Foreclosed Homes

Although foreclosed homes are sometimes great deals, there are some potential pitfalls that you should be cognizant of.

Occupants

When dealing with a foreclosure, the occupant is often still in the home throughout the foreclosure process. How would you feel if you were losing your home because you couldn’t afford the payments? Some people would take it with grace, but that’s unfortunately not always the case. There are many instances where the occupant damages the home out of spite and hurt feelings. For example, they may leave holes in the walls, destroy appliances, let their pets urinate and defecate on the floors, etc. If you ask a real estate agent, I’m sure they could tell you some horror stories.

Repairs

The bottom line is that you don’t know what condition the home will be left in. If the property is at auction, you won’t even get to see the interior until you’ve already paid in full. Even if you are able to see the property’s interior prior to the sale, you may not be able to request repairs before buying the home. What you see is what you get. If the property is in bad shape or not up to code in specific ways, it may limit the possibility of some loans, such as an FHA loan. Although this varies on a case-by-case basis.

Competition

With the recent surge in real estate investors who flip property for profit, you may find yourself competing with other potential buyers for the same property. This is especially true at an auction. Before going in, set a hard budget for yourself and don’t pay more than you would earn from the property in the end. To give yourself an edge, have the required funds available to pay a foreclosed property’s outstanding mortgage balance to the lender.

For all the information you’ll need about risks and potential benefits of purchasing a foreclosed home, consult a trusted local real estate agent.

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Jason Cohen (Pittsburgh) originally posted this content at JasonCohenPittsburgh.com.

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Do You Know How to Spot a Shady Contractor?

The first building Jason Cohen bought in Pittsburgh wasn’t particularly luxurious – but to Jason, it had potential. He knew that he could refurbish and turn a profit on it if he sank funds into a remodel, but he had neither the time nor skills to complete the repairs it required by himself. Cohen needed a contractor he could trust to do the job well on-schedule, and within the tight budget that he could afford.

However, the hiring process wasn’t as simple as finding and signing the cheapest contractor to come along; Jason knew that many homeowners in his position fall into contracting traps when they entrust the remodel of their property to underqualified or shady contractors. Luckily, Cohen found a competent and fair contractor to work with, and that initial project went well. With over a decade of experience under his belt, Cohen continues to hire contractors in

Pittsburgh and elsewhere to improve his properties – and watches for the same red flags that he steered clear of in his early years. Those warning signs are listed below.

Can’t provide proof of permits and insurance

Never work with a contractor who can’t show you their permits, licenses, and insurance papers. Each state has different regulations regarding the licenses contractors should have before beginning work on a project; make sure your applicants meet all of the proper requirements before you hire!

Asks to work without a contract.

If they don’t sign a contract, they don’t get the job. Never trust a contractor who offers to take on the remodel with only an informal verbal agreement; without the proper documentation, they can exit the job at any time and leave you with no money and a half-finished project. For advice on what to put in a contract, check out HomeLogic’s post on Contract Basics.

Offers to work at an unreasonably low rate.

Don’t trust a lowball offer, especially if the contractor asks to be paid upfront or in cash. Some shady operators will lead with a low initial cost, then demand more money from the homeowner later, citing a budgetary miscalculation. Don’t be fooled by contractor scams – go with someone who offers quality work at a reasonable price.

Lacks the proper equipment.

Avoid hacks! Make sure that your applicants have the proper equipment to complete the job at hand. A lack of necessary equipment indicates a lack of experience and skill, and hiring an under-qualified contractor will cost you in time and money. If you’re unsure of a contractor’s competency, reach out to their references! They might provide you with insight into the types of jobs that your applicant has worked before, and whether the contractor is right for your project.   

Acts standoffish or disrespectful

Your remodel is important to you, and any contractor should be aware of its value. Find someone that you can work well with; someone you trust to listen to what you need from the project. Odds are, you’ll be working with this person for weeks or months – so don’t go with someone who brushes away your concerns, skips meetings, or acts rudely!

*Originally posted on JasonCohenPittsburgh.com