Wednesday, August 3, 2011

Is Buying A Repossessed Home A Good Investment Or Not?

This Lovely Ranch Style Home
"The Money Pit"
I started on this topic as the result of reading a news story about many banks that are beginning to demolish many repossessed homes all across the United States, but especially in areas where the market on real estate   has pretty much crashed to levels most of us have never before seen, or care to see again.  I am readdressing this topic, as in the first installment on this subject, I mentioned someone I know through Pet Pig rescue and adoption who had within the past year invested into a repossessed home on about an acre or so in Nevada.  The place looked rather nice, that is from the outside.

Matching Tile Roofed Gazebo
in rear of the home
They took some bids for fixing the place up, and the one they decided to go with was in the neighborhood of $20,000. That, to me, sounded like a red flag, right off, but I'm not the buyer, nor have I seen the place personally, except from photos which I received, every now and then as work progressed.

As it turned out, the "contractor," failed to perform, and they were forced to actually complete everything themselves, buying materials at local hardware stores, such as Home Depot and Lowe's.  The finished, or nearly finished product has now cost them in excess of $60,000.  They ended up cashing in their retirement funds, as well as about every penny they had in savings.  The wife, had to take a two month leave of absence from her day job, which also amounted to a significant amount of money.

A Real Mess

I have been given permission by the buyer, (or victim) of the once lovely tile roofed home, with a matching gazebo in the back, to share their story and their photos, in hopes it may help others learn to be more careful about this kind of investment, as well as the warning to be sure to make sure that the contractor you hire, is a state licensed contractor, with a General Contractor's State License,  and not just some person who says he is a contractor, or even someone who was recommended to you.

Make sure they actually do have the required state license,that they are bonded to perform as a contractor  and that they have workers compensation insurance to cover any injuries that may be sustained by any employee they hire to work on your property, all city or county building permits, and city licenses required, as well.  Be sure that you also get a signed paper which all employees have personally signed, to verify that they have been paid in full for work performed on your property.  This should be done weekly, as most people in construction are paid weekly.  Be sure you get releases from all material suppliers from which they may have purchased materials used on your project.

Notice all the walls and plumbing work being ripped out
so pipes and other damage can be replaced or repaired.
This is exactly a great part of the reason many banks are demolishing many homes which they have already repossessed.  Sitting gutted, and damaged, they will never get their money back.  Most people don't have the funds to perform these major repairs to bring the home back to a habitable condition.

Sometimes, squatters will just move in to places like these, calling them abandoned.  There are legalities which may or may not allow a person to do so successfully.  Even if they can stay, they will either have to live in unsafe, and possible unhealthful conditions until they can complete needed repairs.

In any case, this is just the tip of the iceberg, and anyone thinking about buying a repossessed residence should be extremely careful, and fully investigate before you invest in such a shaky situation.

Tub/Shower Finally Finished
When I first heard about so many new homes still being constructed, I wondered why on earth would they continue to build, when there are millions of empty homes, from coast to coast, already.  What I did not take into consideration is the fact that many, if not most people who lose their homes, whether through circumstances beyond their control, or by design, literally rip out nearly everything they can take from the interior, as well as the exterior of these homes, leaving them in horrific condition. The home is then, nothing but an empty shell.

Most home buyers, are not prepared to do the needed repairs.  Some more adventurous ones, may have the skills and knowledge to do most of the work themselves.  But, most  people who are looking to buy a home, would prefer it be in move in condition, or nearly so, at least.

As they say so often, INVESTIGATE BEFORE YOU INVEST.  That goes for houses, as well as for stocks and bonds, gold, or even insurance.  Be a smart shopper, and don't set yourself up for a hard fall.

Watch Which Way the Wind Blows

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