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  • Buyer Beware When Investing In Bankruptcies

    Many real estate investors talk about how much money they have made when investing in bankruptcies.  What they do not talk about are the pitfalls to watch out for in the properties.  There are many things which can go wrong with any real estate deal.  Investing in bankruptcies opens up an entirely new realm of possible problems.

    Most bankruptcies are vacant properties.  This means the property has sat for quite some time with no one living in it.  The power has been off, as well as the water and heat.  The house has had a chance to adjust to it’s environment.  This is when the problems can occur.  Many an investor has been excited because of a great purchase only to find there were so many repairs needed on the property the result was a financial loss.

    The first thing you should do to avoid complications when investing in bankruptcies is to have a property inspection.  This is well within your rights as a buyer and do not let anyone tell you otherwise.  You will want a qualified contractor to look at the property.  This will ensure you know exactly what you are buying.

    A contractor who knows what they are doing will be able to tell you how old the roof is and when it may need replaced.  He will also know if any weak spots should be strengthened also.  He can look at the trusses and other framing to determine if there is any termite damage or other boring insects who have taken up residence.  An infestation is something which must be reported to any potential buyers.  This can scare off some people, so if you are planning on flipping the house you may not want one which has these problems.

    Another problem some vacant properties have is with the plumbing.  Although the pipes may have been winterized or emptied when the house was repossessed does not mean they are in good working order.  Although it is almost impossible to see some leaks, a qualified inspector will notice water damage.  They will be able to tell you if it was from a plumbing problem or from flooding.  Either one is a potential problem from which you should walk away.  Again, flood damage must be reported to a potential buyer.

    The foundation is closely looked at when a quality home inspection is being done.  The contractor will want to see if there are any cracks which indicate a shift.  This is a good indication of a large financial repair bill.  The footer may not have been poured properly or it may have been too thin for the environment.  When the foundation has started to slide, there could be major financial problems.  This is a critical point in the inspection which someone less qualified may know nothing about.

    When you are investing in bankruptcies the seller, usually a finance company knows nothing about the property.  It is up to the buyer to have the inspection done so there is no question as to the condition of the building.  This is why it is considered a buyer beware market.  A seasoned investor will have a contractor or inspector they can call on to check the homes the investor is interested in purchasing.  Learn from what other investors do to make money when investing in bankruptcies.  Have an inspection done of the property before making that offer.

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