In this article, I will give some key advice for buying foreclosed homes, because in the United States of America acquiring a foreclosed home is dissimilar from purchasing a standard resale. I lay down for you five key pieces of advice to support you with the process of taking possession of foreclosed homes.
Instead of rises in home values besides a stable housing market, many specialists roughly affirm the foreclosure calamity the nation is facing today is far from ended. Nonetheless purchasing a foreclosed home is dissimilar from buying a typical resale. Because of what you can find In many scenarios are:
- First, only one real-estate agent is involved.
- Second, the seller wants a preapproval letter from a lender before accepting an offer.
- Third, there is little, if any, room for negotiation.
- Fourth, the home comes as-is, and it’s up to the buyer to pay for repairs.
On the other hand, numerous bank-owned properties or are unoccupied, ready to find a new owner to move in as quickly as they can just by following a simplest administrative process.
“Buying a foreclosure home is definitely not complicated at all. But it’s not easy either,” said my friend Sarah Jane, an independent broker working for a private real estate acquisition company in New-York. Ms. Sarah Jane continued by saying to me: “You can find houses with spectacular discount pricing; nevertheless often it takes visiting different of houses and writing various offers to get finally the home you were looking for.”
At this point let me pass to you the five key pieces of advice you need to know for buying a foreclosure home:
- Befriend with a broker and a lender
You have to find a realty broker and a lender because the first two steps in buying a foreclosure should happen almost simultaneously: Find a real-estate broker who works directly with banks that own foreclosed homes and get a preapproval from a lender.
Phil Pustejovsky, a real-estate investor, a mentor, and author, recommends in his book “How to become a real estate investor”, that shoppers first visit any site with a database of foreclosed homes.
You also could look at a local public record office in the courthouse of your county or you can visit a real-estate website that lets you filter the results to see only foreclosures. You might find the acronym REO, which means “real estate owned” by a bank. Meaning that a home has been through a foreclosure process and now the lender is selling it.
Arrange yourself to get a broker on your side all the time, because the goal of searching through foreclosure listings is not to find a house; it’s to find a trusted agent. Banks usually hire a few real-estate brokers to handle their properties in a specific market.
In many cases, the purchaser works directly with the bank’s broker instead of using a buyer’s a real estate salesperson. In this strategic scenario, the commission doesn’t have to be split between two brokers.
“A lot of these Realtors have a long-term relationship with these banks, they have access to the shadow list meanings they know of listings that haven’t even come on the list yet,” Ms. Sarah Jane said.
“Call them about the listings that you’re interested in, but also ask them about listings that may be coming up because sometimes it may take a day or two or even a week before a listing actually comes onto the database.”
In places where thousands of foreclosed properties are for sale, you might not get much one-on-one attention from overloaded agents. To prove that you’re serious about buying, said Ms. Sarah Jane, “Right before or after you meet with the agent, meet with the lender.”
- Always get your proof of fund ready
Get yourself a preapproval letter unless you plan to pay cash, you’ll need a recent preapproval letter from a lender. The letter will describe how much money you can borrow, based upon the lender’s assessment of your credit score and income.
“The problem is, buyers, want to find the house first, and then they think they’ll work out the financing,” Ms. Sarah Jane said.
“But the problem is, the really good deals on these bank-owned, they go quick — and the buyer doesn’t necessarily have time to try to work out the financing afterward. They need to work that out first.”
Ms. Sarah Jane said some first-time buyers make the mistake of assuming that the bank selling the home will also finance the mortgage as part of the deal.
“Don’t expect to get financing from the bank that foreclosed on it,” she said. “That’s a totally separate transaction, and they view it that way. The people in the bank’s REO department are not loan officers. They are getting rid of bad assets.”
- Price is a significant factor
Retain in mind estimating depends on sales pace; there’s no rule of thumb on what the bank’s bottom line is on price. Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or “comps.”
Ms. Sara Jane said: “You really have to look at the comps in today’s current market conditions and write a reasonable offer based on that.
Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it’s priced too high, and you can come in lower.”
Ms. Sarah Jane further counsels to look at the “absorption rate for your product class.” That means you should find out how quickly comparable houses are selling.
If homes in your product class are selling swiftly, “the best advice on a bank-owned property is to come in at your highest and best unless the property has sat on the market forever with no activity,” Ms. Sarah Jane said. “If you’re going to be upset because you would have gone $3,000 more, but you lost the property, just bid the higher price in the first place.”
- Foreclosure homes are selling as is:
In the foreclosure buying arena do not expect repairs discount, keep in mind that foreclosed houses generally are sold as-is. Ms. Sarah Jane said:
“Let’s say the house is listed for $250,000, all the comps are $250,000, and so the client comes in and said, ‘Hey, look, I want to buy this house but I’ve got to do paint, carpet and fix some mold damage, so I want to take $28,000 off the price.’ You know what? All the other ones were in the same condition, and they sold for $350,000.”
Ms. Sarah Jane recommends getting to know tradespeople who can assess and repair damage from pests, mold, flood, and leaks, you can networking with some general contractors that may help also. Now you know better how to handle buying a foreclosure house then I wish you good luck in initiative keep in mind any financial transaction comporting risk always seeking for a real estate attorney for legal advice when you go ahead to close a foreclosure deal to protect yourself.
