Buying a (foreclosure) House that Needs Work

The day we toured our future home.  When the bank foreclosed they turned off all the plumbing and duct taped over everything.  Most of the light fixtures were ripped out and built in appliances missing.
Looking at foreclosures takes a lot of vision!

There are a number of bank and finance expert articles on the web concerning the how's of buying a foreclosure or pre-foreclosure home.  So I will try not to duplicate that technical information here.  However, since we purchased this place, and some of the others we've fixed and resold I've noticed that a lot of people seem curious but also frightened by that process.  I wanted to share some of the tips I would share with a friend who is interested.

1. You are right to be curious.  So much money can be saved if you are willing to go through the hassles of home remodeling and willing to do the research to get better prices than new construction.  It may not affect your monthly payment tremendously but it can give you a much higher amount of equity when it comes time to sell.  It's a long range view.
2. One common myth is that property tax will be higher in a nice neighborhood so even though the price may be reduced on a foreclosure/bank owned property the property tax will be higher than a new neighborhood.  Many people don't realize their property tax can be protested and changed.  We did that and they reduced it significantly, virtually erasing any net gain we would have had building a new house.  Talk to your county tax assessor's office for instructions on protesting your property taxes.  
3. One thing that made our transaction successful (and even possible) was the real estate agent we were using.  Since my husband is an attorney and former real estate agent himself he could have eventually handled this transaction himself but we were SO grateful to have the services of an expert who has been working with banks on these properties for 30 years.  He knew exactly the right timing and negotiation tactics to get our family this home.  If any of this had been done differently it would have been swooped up by cash investors the next day.  He was a gem and the ONLY reason we got this house.  We are very indebted.
4. It takes research.  Not everyone is handy enough to do their own plumbing or electrical or flooring.  I get that.  We hired out our carpeting, but Casey has done most of the rest.  There are certain things you may love and other things you'd never touch.  You don't have to do all the work to make it a good deal to buy a fixer.  But what you DO have to be willing to do is the research on what things cost.  Before you make an offer it is a good idea to have priced the materials and labor on all of the "must do" projects to decide if the property is a good deal for you.
5. While doing this research take into consideration the types of materials you want versus what you'd get building a new home.  We got a better deal than a new home, as you'd expect from an older one, but what makes it an exceptional deal is when you can get much nicer materials (ie. tile instead of vinyl, thick soft carpet vs. the cheapest kind, stone counters, tall cabinets, etc.) than you would in building.  If you have never  built a new home you might be surprised at how cheap the base level materials are and how much the price adds on as you upgrade to decent stuff.  You may find that you'll want to upgrade either way, so it pays to just do it in a bigger, older house you can get for less.