Foreclosure BasicsA Blight On The Community

The last decade now has been an adventure in real estate to say the least. We went from the heady days of the real estate bubble, when it appeared that no investment could go bad, to the lows of the property crisis, when it seemed like half the houses in North America were in foreclosure.

Although the state of affairs has returned to what would previously have been recognized as normal, the market still has plenty of distressed properties to dispense with. If one of them is in your neighborhood or, even worse, right next door to you it can bring a plague of unfortunate effects on your community.

Foreclosure Toxic Disaster Zone

Homeowners who live next to distressed properties have the concern of them being occupied by transients or turned into a methamphetamine factory, the contemporary equivalent of a toxic waste dump, fire hazard and a hotbed of crime. This will do real and significant damage to the value of all of the surrounding homes, just as many owners are beginning to struggle out of negative equity.

There might be a temptation to buy the foreclosed property to save your own home’s value and the quality of life in the neighborhood. This strategy sounds good if you can afford it on paper but there are many practical issues that arise. Unless you have lots of cash to spend on high risk ventures and even more patience, the process of purchasing a foreclosed home can turn out to be extremely stressful and downright fraught.

Cracked Foundations And Clouded Titles

Once you get into the process of closing on the purchase you might find some last minute claims on the title or liens that had not been obvious before you entered escrow. A previously obscured second loan could send up the closing price significantly. It may even turn out that the rightful owner is impossible to find.

A property that has not been occupied by a responsible owner or tenant for an extended length of time can have any number of faults that you will have to address out of your own funds, once you secure the title. The former owners or transients may have stripped all of the fixtures and fittings before moving on. They may have left forty years worth of hoarded junk piled to the ceiling or there could be some fundamental structural fault such as a cracked foundation.

Risky Neighborhood Heroics

If you can make it work to rehabilitate a foreclosed home you could be doing a favor for the entire neighborhood. The removal of an eyesore and returning the property to normal occupation will improve the quality of life and value of homes in the immediate vicinity. Overcoming blight is a real favor for the community.

Fixing up foreclosed homes by members of the community is possibly the best outcome for all stakeholders. It is not always possible because the risks involved make it much easier for cash investors than for local homeowners who might have to seek funding from a financial institution. If you are intending to put a bid in on a foreclosed neighborhood home it is best to consult a foreclosure attorney and establish all of the risks. Once you have overcome the risks and uncertainty you may have found a good investment and done a good turn for your community.

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