Buying a foreclosed property can save a lot of money, it can also be an expensive mistake if not done correctly. There are many bargains out there with all of the foreclosures on the market, just be sure to do your homework before you make an offer.
Here are some tips to consider when looking for a foreclosure.
- Get pre-approved
- This should be the first step before beginning a search. Just as should be done with any other type of home purchase, get pre-approved for a loan. Not only will you know how much home you can afford, it will speed up the process once you have selected a foreclosure to make an offer on.
- Understand the foreclosure process. Foreclosure is the means by which a lender tries to recover the amount owed on a defaulted loan. The process can end in a number of different ways:
- The borrower pays the default amount and brings the loan current
- The borrower sells the property to a third party during the pre-foreclosure process, paying off the loan.
- A third party buys the property at auction.
- The lender takes ownership and attempts to resell the property.
- Work with a real estate agent
- If you are a first time home buyer or if this is the first time you are buying a foreclosure, a real estate agent can prove to be extremely valuable in helping you navigate the foreclosure process.
- Find properties you are interested in
- An agent can help you sort through the available properties until you have a manageable list of properties that meet your needs
- Work the numbers
- Buying a foreclosure is not the same as buying from a homeowner. In most cases the property is being sold “As-Is” with little room for negotiation. Make sure the number work for you. Determine how much money is needed for repairs and upgrades.
- Check for liens. In addition to the mortgage, there may be other liens for taxes, repairs etc., that may raise the purchase price.
- Make an offer
- With the help and knowledge of your agent you should be able to make an informed offer.
- Offer less than the asking price or ask for other concessions. Don’t assume the banks are firm on their pricing.
- When your offer is accepted
- Once your offer is accepted you should have a certain period of time to do inspections. Although the home is being sold As Is, you may discover defects that make the transaction no longer viable. In some instances, you may be able to negotiate repairs with the lender.
The keys to a successful foreclosure purchase are diligence and education.
If you are in the market to buy a home or just considering your options, it costs nothing to learn more. Call or email Linda for a free, no-obligation, no pressure consultation – 910.409.3519, Linda@LindaMehner.com.