foreclosure 3There’s no question that this recent recession and the explosion of the housing bubble created a wave of foreclosures that crashed all across the country. From Atlantic City, New Jersey to San Diego, California, foreclosures and abandoned properties are springing up left and right. For many homeowners this fact is a source of stress and uneasiness, but for investors and prospective home buyer’s the foreclosure epidemic can be a blessing in disguise.

Every cloud has a silver lining, and foreclosure is no different.

Especially when foreclosures happen en masse, prices in the housing market depreciate well below peak levels. It’s a buyer’s market out there, and with a few savvy moves an investor can make a killing. The problem with investing in foreclosures is, despite the attractive prices, many foreclosed properties have serious structural defects and potential legal complications that can eat away at your profit margins. Every dollar you sink into repairs is a dollar less you make on the flip. The other side of that coin is that making a few cheap repairs can greatly increase your new property’s value. It’s a balancing act. So before you decide to leap into the foreclosure market as an investor, consider these top three hidden foreclosure defects.

Foundation problems

This unseen structural defect can pretty much destroy your investment. Houses with foundation problems like cracks and water damage have greatly reduced market value, and once you know about these problems as a homeowner you are required to disclose them. Making matters worse, foundation problems can be extremely expensive to repair, cutting into your bottom line.

Electrical problems

You may not notice it when you’re inspecting a foreclosure with no appliances and fixtures, but your new investment property might have serious electrical problems. Extensive problems with wiring require the attention of an electrician and can be very expensive to ameliorate.

Legal problems

The unseen structural defect. Foreclosed properties often have liens taken against them as a result of the previous owner’s financial problems. Make sure you research your property’s background thoroughly before you sign the deal.

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