March 1st, 2016 4:29 PM by NE TEXAS REALTY GROUP
Know When Buying a Foreclosed Property
If you're pursuing purchasing a foreclosed property, there
is a lot you should know if you have never done it before. Yes, there are tons
of great deals to be had in the market these days, but there are different
stages of foreclosure and the more you know, the more you can protect yourself.
This is when the homeowner still owns the property and knows
there is potential for foreclosure. They're likely not current on their
payments and are in danger of destroying their credit and losing any equity
they have. Buying at this stage is tough - the sellers may be on a deadline and
things have to happen quickly. The sellers will be extremely motivated and may
work out a short sale if the bank allows and they can find a buyer fast enough.
option is to buy at auction.
This should be approached with caution - there is a lot of
risk such as liens on the title and unknown repairs. Also, cash is typically
required on hand at this stage if you beat the bank's bid and win the auction.
chance to get these great deals is post-foreclosure.
At this point, the home is known as REO - real estate owned
property by a bank or lender. The bank won at the auction and is now selling
the home to recoup as much money as possible - at least what is owed on the
property. The bank will likely hire a local real estate agent to put it on the
market. The longer the home is on the market, the more willing the bank is to
work with you on selling price. Keep in mind, banks do not enjoy the business
of owning real estate – they want to get rid of it as quickly as possible.
A few things to keep in mind when purchasing a foreclosed
Get a full approval from a mortgage lender who has verified
your income and assets. This will give you more negotiating power.
Pick a zip code you are interested and do research on what
homes are selling for and the recent trends with property values in that area.
Get an inspection done and make your offer contingent on satisfactory
result from the inspection.
Determine potential repairs and their costs.
Remember you have the upper hand in negotiations with
regards to the bank paying closing costs and making repairs.
To find foreclosures, you'll want to work with an experienced
real estate agent who has access to local multiple listing services and can
pinpoint the potential deals for you. Be cautious and patient in the process of
buying a foreclosure. If done right, you will find a great home in which you
may have some instant equity.