Considering buying or flipping a U.S. foreclosure property?

With U.S. home prices declining many people are considering buying foreclosure properties in the U.S.  Foreclosure properties in some states are selling for $1.00 to $1,000.00, but before you jump on the band wagon thinking you are getting a great deal, what are the things you may want to know….

Ghost Towns – Some neighborhoods have so many foreclosures that they are becoming “ghost towns”.   The problem with purchasing a foreclosure in a “ghost town” is that the neighborhood may or may not come back to life when the economy eventually gets better.  A lot of homes in these “ghost town” neighborhoods are being torn down because no one wants to purchase the homes and the neighborhoods are attracting vandals and crime.

Flipping – With attractive prices many people are thinking they can fix up these cheap foreclosures and flip them for profit.  Some of these flippers are also learning the hard way.  The house may have unforeseen problems that cost more to fix than planned, thieves may break in and strip out everything once you are done renovating and/or the house may take longer to sell than planned or may not sell at all.

Consider employment levels – Cities whose economies are not diverse enough or depend on one or two industries as a means of revenue/support have been especially hard hit. For instance, with auto sales slowing Detroit has taken a hit.  Nevada has an 8.3% unemployment rate because tourism is down and gambling revenues have dropped 69% as of June 2008. 

Retail sales – Are stores, restaurants, etc. surviving or shutting down in the neighborhood?  Sure it is a given that a business or two may fail in the neighborhood, but when anchor department stores and 25% of smaller stores in a large shopping mall are shutting down this may indicate further economic declines and hard times will hit the neighborhood. 

Overbuilt – Some neighborhoods are way overbuilt with too many homes for too few of people.  These areas may take a long time to recover or may not recover at all. 

Remember…

A cheap price on a foreclosure property doesn’t automatically guarantee a quick profit in the future, a lot of other factors are at play too.

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2 Comments (+add yours?)

  1. coconews
    Jan 29, 2009 @ 10:13:05

    Hi folks,

    Sorry for the long gap between posts. I love the blog, but it can be time consuming when work gets in the way and I’m out of town.

    I have been in California 9.3% unemployment and Nevada 8.3% unemployment. I was surprised at the number of retail stores shutting down completely.

    It was creepy to be in a mall where 25% of the stores are vacant and two of the anchor department stores Macy’s and Dillards have shut down. I was at the same mall one year ago and none of the stores were shut down then.

    It’s a real eye opener what is happening with the U.S. economy and with retail stores in some residential neighborhoods that are off the typical tourist path.

  2. warren
    Jan 30, 2009 @ 17:58:18

    Be extremely careful if buying a foreclosure, we purchased one and they stripped everything from the house. Hinges, door knobs, kitchen cupboard handles, light fixtures, appliances, even the air conditioning system. It was a mess and the repairs cost us more than we expected.

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