Health & Fitness
Buy a Foreclosure: Tips on Buying A Home In Foreclosure
Here are some tips on buying foreclosures that could get you a good home at a significantly lower price than its genuine value.
When you buy a foreclosure, it is not the same as buying a home on the general real estate market. Here are some tips on buying foreclosures that could get you a good home at a significantly lower price than its genuine value.
Some foreclosed homes may be sold at auction, although it is more common for a foreclosed home to be repossessed by the bank and then listed for sale to the highest offer. In many cases, all a bank wants is to recover the balance of the loan plus expenses, although it will certainly accept the highest offer made.
It is important to understand from the start that buying a home in foreclosure is not the same as a normal house purchase, as the first step below will make evident.
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Get Preapproval From a Lender
Before you even look for a foreclosed home you must get preapproval for your mortgage loan. If you come across a property you like and decide to make an offer, you will not have time to approach a building society to arrange a mortgage. Such homes usually go quick, so when buying foreclosures it is essential you have your finance already arranged.
Those seeking to buy a foreclosure set out with that in mind from the start. Many do so with a view to reselling it quickly for a profit, and once higher-end properties become available they are sold quickly. You buy it as seen, and might not even have time for a valuation or an inspection to be carried out.
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Search the Internet
There are plenty of websites out there that offer a list of foreclosed homes or "special access" to view these homes for a fee. This is not necessary as there are plenty of websites available to view foreclosed homes that are free of charge. Check out websites that deal in foreclosed homes such as Fannie Mae Homes in Foreclosure, Freddie Mac Foreclosed Homes, or FHA Foreclosed Homes. These websites are the source that all other websites feed from. While it is a great place for you to start your search for a home, it is best to let a professional handle the actual details of any possible transaction.
Find a Real Estate Agent
Local agents might have databases that list foreclosures and you can search these out. Banks use real estate agents to list their foreclosed properties. When buying foreclosures you should try to use the bank’s agent to handle the purchase so that the same agent is dealing with the sale and the purchase. Failing that use an agent experienced in foreclosure purchases.
Check Comparable Sales
When you buy a foreclosure you will be asked to make an offer. The bank might receive a number of offers, all of them based upon guaranteed preapproved finance. It will therefore choose the highest. In order to get a good idea of the real value of the property, check comparable sales.
These are the recent selling prices of homes of the same size in the same or comparable area and in the same condition. While you don’t want to miss a bargain by underbidding, you do not want to offer too much and pay more than you should. Make sure the offer you make is reasonable with respect the selling prices of other homes in the area by checking comparable sales.
You Buy a Home in Foreclosure as Is
The price you offer is what you are prepared to pay for it – you cannot make an offer and then later deduct a certain sum for necessary repairs. The offer price is what you pay. You could lose the house if you offer $350,000 and then deduct $25,000 because the roof is leaking and needs a repair. If the home is definitely in need of repair, perhaps a renovation loan with a one time closing could be an option. A renovation loan would allow you to purchase the home and include the cost of repairs in the financing.
Be Quick When Buying Foreclosures
Try to find out how quickly homes on the market sell in the area. That will tell you how much over the asking price to offer. If homes sell slowly then any offer at the bank’s asking price might secure it. However, if they sell quickly, then you might have to make an offer significantly above the asking price.
Get the comparable prices, decide what you are willing to pay to get the property, and then offer that. Don’t lose a great home because you thought you might ‘get away’ with an offer of 25,000 less than you could have offered. Decide if you really want it, and if you do, offer the maximum you are prepared to pay for it!
Foreclosure Auctions and Short Sales
Sometimes a foreclosure will be available at auction, in which case the process is easier. However the majority are sold on offers. You might be lucky and get the opportunity to buy a ‘short sale,’ where the lender allows the owner to sell the property at a lower price than is still owed on it. This is how some banks cut their losses. Common during the subprime mortgage derivative crash, short sales are now becoming relatively rare.
To summarize then, when you buy a foreclosure you can buy a home at very good price. However, in many areas they tend to go quickly. You must therefore have your finance preapproved and make the best offer you are prepared to afford. You buy the home as is, and are responsible for all subsequent repairs. However, the reward can be high! Have more questions on foreclosed homes? Please call Anthony DiLeo at (732) 264-2700 x18 or email anthony@intercountymortgage.com
