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Should you buy a foreclosure?

Foreclosed properties can be a great deal for homebuyers, whether they're planning to live in the house or rent it out. But they should know the potential pitfalls.

Planning to flip?

People can, and do, buy foreclosed houses cheap so they can fix them up for quick resale. In falling markets, though, it can be hard for buyers, particularly amateurs, to do this successfully. If you don't get a steep enough discount or spend too much on repairs or don't find a buyer quickly, what looked like a great deal can become a cash drain. Many investors now are focusing on properties they can rent out for several years, so they can benefit from price appreciation when it eventually returns. Some experts recommend that foreclosure buyers be ready to hang on to a property for seven to 10 years.

Don't expect to automatically get a screaming deal. Some banks slash a property's price for a quick sale, which means you'll get the house for less than comparable homes in the area. Other banks don't offer much, if any, discount, and intense investor interest in a property can lead to a bidding war that drives up the price.

Pay for a thorough inspection before you buy. Foreclosures are sold "as is," which means the bank won't make repairs or improvements. Even if the house's previous occupant didn't trash the place in a fury, the home may have hidden defects that could cost tens of thousands of dollars to repair. A bad foundation, extensive water damage or bad siding or drywall could turn a seemingly good deal into a nightmare.

Get a registered property inspector to do a full inspection, including termite inspectins and be willing to take a loss of $300 to $500 (the typical inspection cost) if the inspection turns up something major.

Here at Peninsula Properties, we have sold tons of foreclosures and have many very happy home owners, However, it was a process of which we fully understand. Contact us if you are interested in buying a foreclosed Jacksonville home so we can steer you in the right direction.