Foreclosure Home Valuation
How to assess foreclosure property’s value? Overall factors
Paying the right price is as important as finding a good foreclosure home for sale. Factors that you need to take into consideration in assessing the value of foreclosure property are as follows:
- Home neighborhood relates to location and is one of the most important considerations. Areas surrounded by good maintained and improved homes reflect pride of ownership and add value to all homes, including foreclosure properties.
- Demographics: type of people currently own and rent homes in the area and those who are coming in the last few years.
- Level of property taxes may range up to over one percent of property’s value. Potential of having higher taxes is related to how local government/municipality manages its finances. Many local governments that are in serious financial trouble may resort to increasing property taxes sooner or later.
- Employment levels: Foreclosure homes in areas where businesses hire more people appreciate more than those in areas where businesses are downsizing or leaving the county.
- New shopping malls and centers are good indication that more people will settle around those areas. Construction of new homes is also good news that the area is becoming more popular.
- Activities of developers especially in converting rentals into condos and apartments to sell them are not a good sign. Flooding the market with so many homes for sale may also depress the prices of foreclosure homes as well.
- Changes in zoning also affect home prices in the neighborhood.
- Number of real estate market transactions in the area, days on the market (DOM) and the number of homes for sale, trends in home prices, changes in level of rents, and rental incentives are indications of increasing or decreasing popularity of the area.
Foreclosure home valuation: Property-specific factors
Invest in foreclosures or pre-foreclosures in areas where appreciation is more likely to happen.
After examining the general factors affecting the foreclosure home prices in the area, then you can concentrate on specific bank foreclosures or government foreclosures in the same location.
What type of foreclosure property is good for invesment?
Condominiums are subject to many restrictions. Condominium association may even have restriction on the ratio of ownership and rental units. That means that you may not be able to rent your condo if such maximum percentage is reached already. There may be variety of fees involved even if the property is vacant. So, investing in condos should not be your top priority.
In general, single detached family homes appreciate more than condos, apartments, and townhouses. You can also repair, paint, remodel, and improve single family homes more liberally as compared to others.
How can you compare similar foreclosure homes on common basis?
The simplest way for such comparison takes into account the following data:
- price per square feet
- price per bedroom
- price of family room, den, bathrooms
- price of pool, deck, garage, etc.
You may also restrict your comparison to square feet of living area to make it more meaningful.