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There are many people out there who want to purchase real estate properties. The problem is, they just do not have enough money.
So, rather than enter into a binding contract to purchase a brand new house just to have it foreclosed because of failure to pay, why not purchase a foreclosed property right away?
Foreclosed houses are real estate properties that have been foreclosed by the lending companies or the government because of the failure of the owner to pay their loans or mortgages.
As such, whenever a banking institution or an agency end the long and complicated legal process with the foreclosure, they have to sell it off right away to get the proceeds and apply it to the terms of the contract.
This reality is actually one that most households face nowadays because of failure to properly manage finances and due to the difficulty in the economy.
Despite the sad picture of foreclosure, it should not keep you from purchasing these properties. Actually buying foreclosure houses is a good way to turn a sad thing into a wonderful opportunity. Make some good out of it.
Some tips for buying foreclosures
1-Avoid Court Auctions!
Court auctions may seem appealing, but there are many drawbacks. The first is you are purchasing the home “as is” without the time to conduct any inspections or assess for the need of repairs or what they may ultimately cost. You’ll also have to pay cash for the home. Lastly there may be back taxes or liens attached to the property.
2-Do Your Homework!
Just because a home is a foreclosure doesn’t necessarily mean it’s the best deal! What may have been $500,000 home that is selling for half that price is no bargain if other comparable properties in the neighborhood are selling for even less! A Realtor can help you understand the market by doing a comparable market analysis and also help you identify current trends.
3-Inspections!
When buying a foreclosure it is best to get it inspected. Typically if people can’t make their loan payments, they aren’t going to be able to afford repairs or routine maintenance. Some owners upon being foreclosed will even do excess damage to the property out of anger of being foreclosed! They may strip the copper wiring and plumbing and sell it for scrap or even sell the appliances, fixtures, and cabinets or flood the home by leaving a faucet running! It is best to get it inspected, so you know exactly what you are getting into and the costs of necessary repairs.
4-Financing!
It is always a good idea to get pre-approved for a mortgage before buying any property, but more so when buying a foreclosure! Some banks won’t lend on foreclosure properties or will want to make sure the property is in good condition before they’ll loan. In addition if you find a “fixer upper” it’s best to know if your bank will finance the cost of repairs as well. Lastly many banks will require a pre-approval letter or certification of funds before they’ll even consider any offers!
REO Properties:
What are REO Properties?
These are bank owned or Real Estate Owned (REO) as designated on a bank’s books. These are properties which have already been through the foreclosure process and the banks have taken possession. Typically the banks will assess the property and market value and subtract out any needed repairs when pricing the property. Banks are in the banking business and not the real estate business, so they are usually eager to sell the properties to get them off their books.
Tips for buying REO properties
1-Check the foreclosure deed and the amount as well are mortgages taken against the property and recorded in the Judge of Probate’s office.
This helps you to know roughly what the bank has invested in the property.
2-Determine the current market of comparable homes. Current market value as determined by recent sales (what buyers are actually paying) for homes in the neighborhood, sub-division or homes that most resemble the house (square footage, bedrooms, baths, features, etc. ) are the best comparisons. Also ask about pending sales.
3-Prepare for competitive bid situations.
Many times banks will price REO properties below market value and this will result in numerous offers for the property. When presented with this situation, particularly where there are many offers, you will most likely need to offer higher than list price. It’s not untypical for banks to receive 15-20 offers on some properties. In addition do not offer a lengthy list of repairs or time to conduct inspections. Offer to pay negotiable closing costs as well. Also submit a pre-approval letter from your bank detailing you can afford the property. If there are numerous offers keep in mind it’s likely one will be an all cash offer, which banks tend to prefer, however if obtaining financing it may be best to raise your offer price even higher to beat out the cash offer. As much as you can do to make your offer stand out against the others, the more of a chance you have of being the accepted offer and getting the property.
4-What if you are the only offer?
If you are the only offer, then you can probably ask below list price and have a good chance your offer will be taken seriously. You can also request repairs or that the bank will pay certain closing costs.
5-Be Patient!
Many times it will take a week or longer for the bank to review offers.
HUD Homes
What is a HUD Home?
A HUD home is a home that is owned by the United States Department of Housing and Urban Development, otherwise known as HUD. It’s acquired due to foreclosure action on an FHA-insured mortgage.
How HUD homes are sold.
HUD Homes are sold to people with cash or who can qualify for a loan (subject to certain restrictions). They are first offered to owner-occupied purchasers. If no acceptable offer is received during this initial period, then HUD Homes are available to all buyers including investors.
Will HUD make repairs? No. All HUD Homes are sold “as is” and HUD will make repairs, but HUD does encourage you to get an inspection.
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