Home inspections needed before foreclosed properties are purchased

Foreclosed properties, although they may need mold testing and significant repairs before they are livable again, can prove to be a boon for investors that are willing to channel resources and time into these homes.

One such investor, Minneapolis-area resident Dave Grohs, relishes these properties, because he is able to spin them off at a profit. According to NPR, Grohs makes about $100,000 annually in the 30 years he has been in the property investment business. While Grohs does benefit personally, he may also be helping other homeowners in the area.

In neighborhoods that have been plagued by high foreclosure rates, investors like Grohs could be providing a valuable service. Communities with an abundance of foreclosed properties are likely to be viewed negatively by potential buyers.

"Any time you can take a house that's boarded, vacant, and/or condemned, fix it up nice, and then it's occupied, I just believe that it has to stabilize and improve the neighborhood," Grohs told the news source.

According to The Houston Chronicle, Grohs' belief is backed by a 2008 study by the Georgia Institute of Technology and the Woodstock Institute which found that a property's value drops 0.9 percent for every other property that is foreclosed within one block.

Reduced property values, coupled with an expected 6.7 percent increase in crime when at least 2.8 homes are foreclosed for every 100 properties, suggests that foreclosed properties can have significant negative effects on a community.

Before purchasing foreclosed properties, prospective buyers should always hire a home inspection service to reveal just how much work will need to be done before the property can be resold for a profit. A buyer must know what exactly they need to repair or they could find themselves facing an unexpected cost burden.