Being smart about money management is even more critical these days as more and more people are affected by economic hardship. While some people stray away from home investment, others see it as a great opportunity to buy “cheap” foreclosed homes to invest, selling back homes at a higher price once the economic conditions improve. However, it is never a guaranteed shot with home sales, the market is in constant flux. Here are the top 5 things you should consider before making that big decision to invest in the housing market.
First, try to stay away from real estate shortsighted sales, and seemingly great deals that prompt you to make big decisions on short notice. If you have time to wait it out, you may get an even better deal. With home investing, it is never a great idea to jump the gun since your rate of return may not be as great as you foresee. If you are in a rush and need somewhere to live at a pressing date then a shortsighted sale may be your only option, but make you sure you jump on board because of informed decisions.
Secondly, should you decide on a short sale, loan providers require different things. For example, proof of funds and income, credit history, employer information, and other things that represent your current financial state. The main thing here is validating how you will be able to pay back your loans and mortgages monthly.
Third, don’t put all your faith into short housing sales to be seriously discounted all the time. In fact, based on your bank loan provider, the home and property value, and your local expanse, if you are not receiving a price cut of 20-30% lower than the current market value, you aren’t getting that great of a deal and it’s time to reconsider your options.
Fourth, sometimes your home mortgage rate is just as high as financing a home not on short sale. You need to research the loan rates and see if it’s worth it. Oftentimes short sales are sold at current market value and financial lenders already have a set formula for coming up with the amount they expect you to lose. When what you owe is significantly higher compared to the actual value of the home, the lending company might not be so flexible to a lower loan offer or a cheaper mortgage rate. The key here is to go after a home that has been listed in the marketplace for several months and see if you have more negotiating power that way.
Lastly, the 5th thing you should know about investing in short sale homes is that the sale price is often times deceiving. It may be either too much, or too little. Your offer amount needs to be appealing to financial institutions or they may refuse your offer in totality. The best way to combat this is to research current market rates and make sure your offer doesn’t fall so far below the current market value.