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After months of serious searching I closed Thursday on a home I’m planning to rent out. I paid $125,000 for a house that sold four years ago for $355,000. If you’re thinking about buying a bank-owned home I’ve learned a few things. One is that good ones go fast so if you see something you like make an offer. Avoid foreclosure auctions. The houses all need a lot of work and you don’t have time to do proper inspections. Also, the houses at the end of the auctions sell for a lot less than the ones that start off the day because buyers leave. I got outbid early in one auction. Later the same day my friend picked up a three-bedroom home in the close-in Los Angeles suburb of Van Nuys for $163,000 that sold a few years ago for $500,000.
I’d been looking for months in my neighborhood of Los Angeles and while prices had come down I wasn’t seeing anything that was likely to produce positive cash flow, even with a sizable down payment. I made an offer on a short-sale—a home in which the owner is trying to sell it for less than what he owes—but withdrew it when the listing agent didn’t present my offer to the bank. Stay away from short sales.