I've been buying foreclosed properties for almost 10 years. Here's what you should know before buying one.

Billy Pritchard loves a deal.

The Lafayette, Louisiana-based real-estate broker, 46, recovered his niche buying and flipping foreclosed homes aft buying his first foreclosed home 1 twelvemonth into his existent property career.

"It was astatine a really bully value scope wherever I astir apt wouldn't person to put a ton of money into it," Pritchard told Business Insider. "But it was a benignant of location that a batch of group don't for illustration to touch because it's connected piers, and location were rotten beams, joists underneath, and you had to get it leveled and switch each the subfloor."

Taking those risks paid disconnected for Pritchard, who said he now buys and flips a fewer foreclosed homes each year.

A foreclosed property is 1 that is repossessed by the lender aliases slope aft the proprietor fails to make owe payments. A July report from Realtor.com recovered that the median value of a foreclosed location listed connected the MLS sells for 27.2% little than its estimated value.

There are respective ways to bargain a foreclosed home; Pritchard chiefly focuses connected sheriff income aliases waits until the lender aliases slope puts the spot connected the MLS. A sheriff waste is essentially an auction aft the sheriff seizes a property.

Pritchard said he intends to profit astatine slightest 30% aft buying and renovating a foreclosed spot — and sometimes that's easier said than done.

Here are the pros, cons, and misconceptions astir buying foreclosed properties, according to Pritchard.

It's not ever arsenic overmuch activity arsenic you think

When group deliberation of foreclosed properties, their minds mightiness spell to homes successful distress, but Pritchard said that's not ever the case.

"A communal misconception is that foreclosed homes are each going to beryllium destroyed and successful horrible condition, and that you're going to person to gut the full thing," he said.

Pritchard said that successful his experience, astir 50% of the foreclosed homes he encounters need a afloat overhaul. He added that it's uncommon for him to travel crossed a spot that has been neglected beyond repair.

"People deliberation that if a location is getting foreclosed, the group surviving location didn't return attraction of the location — that's not ever true," he said. "Or possibly the utilities hadn't been turned connected successful a agelong time, and group person been squatting successful it, worldly for illustration that. That's not existent astir of the clip — it happens, but it's not a astir of the clip thing."

You tin usually find a awesome woody successful a foreclosed home

The evident use of buying a foreclosed spot is that you're often redeeming a batch of money connected the first purchase.

For sheriff income specifically, you mostly can't spell wrong the location earlier the purchase, truthful you're hoping for a bully astonishment connected the inside.

"When you tin only position the exterior of the home, you whitethorn luck retired and the location whitethorn beryllium beautiful connected the inside," Pritchard said. "I've seen it hap wherever group person only had to put successful $5,000, and they sewage themselves thing that was astir apt 30% positive beneath marketplace value."

Pritchard added that for those looking to flip the location alternatively than unrecorded successful it, there's a batch of imaginable value.

As of April, foreclosed homes connected the MLS accounted for 1.3% of progressive listings, but successful immoderate markets, that stock is importantly higher. The foreclosure stock of listings successful Lake Charles, Louisiana, astir 75 miles West of Lafayette, is 10.2%, the highest successful the country, according to Realtor.

You person to beryllium OK flying unsighted erstwhile you bargain a foreclosed home

Pritchard said that 1 of the biggest cons to buying a foreclosed spot is the deficiency of accusation you're fixed astir it.

In Louisiana, sellers are required to motion a spot disclosure statement successful which they database the defects of a home, specified arsenic the property of the tile aliases issues pinch the HVAC system.

In the lawsuit of foreclosures, banks are not required to capable retired a spot disclosure statement because they ne'er lived successful the home.

"With a foreclosure, the slope is exempt from filing that out, truthful you're benignant of shooting successful the dark," Pritchard said. He added that if the location is listed connected the MLS, you tin get an inspection done while nether contract.

Another con related to a home's history is title issues, Pritchard said.

"You always, always, ever want to get title security pinch a foreclosure," he said. "I person had title issues wherever location were liens connected the title that weren't taken attraction of whenever I purchased the home."

Buying a foreclosed location usually isn't the champion measurement to break into the lodging market

As homeownership eludes galore Americans — chiefly owed to affordability — buying a foreclosed location mightiness look for illustration a viable option. Pritchard said that while location are definite savings, it's astir apt not the champion action for a first-time homebuyer.

Aside from the activity that will astir apt request to beryllium done connected a foreclosed home, a awesome obstruction for buyers is that properties sold astatine sheriff income must beryllium purchased successful rate without accepted financing.

"You person to person the costs fresh wrong 48 aliases 72 hours aft you close," Pritchard said.

If you person renewal experience, a foreclosed spot could beryllium worthy it — but if you're not handy, the consequence is decidedly not worthy it.

"You tin luck out," Pritchard said. "But you person to dream for the best, but beryllium prepared for the worst."