Buying Foreclosures

Great Time To Buy!Like Short Sales, buying Bank Owned Property (REO) can be a good thing. However; unlike the short sale process, it is a bit more competitive and usually doesn’t take as long to determine if your offer will be accepted. Also as in Short Sales, the homes will be sold AS IS, meaning the bank will not fix any defects in the home itself. Don’t let that alarm you. There are things you can do to offset the deficiencies in the home post-contract. Email me at [email protected] and I will let you know how.  I found this great article on Steps to Buying Foreclosures.  Here are the steps as outlined in the article:

 

  1. Understand that foreclosure means that because a home owner has become unable to pay the mortgage, the lender takes back the property. The legal steps involved differ from state to state.
  2. Investigate the advantages. Since a bank or other lender wants to recover as much of its investment as quickly as possible, foreclosed homes are often unloaded at significant discounts– upwards of 30 percent or more.
  3. Find an agent experienced in foreclosures. Some sellers won’t accept offers from unrepresented buyers.
  4. Search for foreclosure listings in real estate magazines, newsletters, newspapers and Internetsearch engines. Call lenders for real estate owned (REO) properties lists of foreclosures. Government agencies such as Fannie Mae (fanniemae.com) and the Department of Housing and Urban Development (hud.gov) also advertise foreclosed homes for sale. Check public records for other leads. A lender deciding to foreclose must file a notice of default in the local county clerk’s office.
  5. Tour the property and inspect it as closely as possible. Some foreclosures–unlike fixer-uppers–are in fairly good shape. Others may be behind in maintenance.
  6. Have your agent check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a bargain.
  7. Check your credit reportand correct any defaults or outdated information. Get pre qualified for a mortgage (see How to Shop for a Mortgage). Depending on the agency handling the sale, it may be required.
  8. Find out if there is a listing broker and make an offer.
  9. Check to see if a foreclosed home has any liens on it, such as unpaid property taxes. Find out who is liable for those costs.
  10. Have the home inspected if the seller allows. Some sellers include this as part of the sales agreement, but the buyer still pays for it.
  11. Be prepared to deal with more paperwork with a foreclosure than you would with a conventional purchase, particularly when a government agency is involved.

Foreclosed and foreclosing properties dominate many of today’s U.S. real estate markets—more than four years after the sharpest observers saw the market shift coming, and more than two years after the reality hit home for millions of American home owners.

The recent Keller Williams Distressed Property Buying Survey unearthed great information about where the opportunities are, how big they are, and how smart, capable buyers are leveraging the current market.

First-time home buyers make up almost half of all buyers of bank-owned foreclosures and soon-to-be foreclosed short sale properties. They’re followed closely by investors seeking rental properties, and a third important group—homeowners who find they can move up to a bigger or better home they previously could not afford.

To help more consumers win as buyers, Keller Williams agents are now offering a workshop, “Winning with Foreclosures,” that shows buyers how to prepare to be successful buying the “distressed” properties—homes that offer, according to the survey, a 10 percent to 40 percent price advantage, depending on the local market.

The truth is: these markets demand most of the same things an ordinary market demands of buyers—only more intensely and pointedly:

  • Money: Buyers must be financially qualified and ready to buy. The best properties go quickly. Buyers must look strong to lenders.
  • Motivation: Buyers must be motivated to compete successfully. Keller Williams agents urge their buyers in this market to be clear about both their “motivating why” and their criteria for the property itself (size, location, condition, floor plan, etc.)
  • Location: Contrary to the rumors, prime buying opportunities exist in almost every neighborhood and price range.
  • Condition: Buyers should understand that repair costs are not necessarily large. The Keller Williams Distressed Property Buying Survey shows the average cost to repair to be $5,000—that’s less than 3 percent of the median purchase price in the U.S. today.
  • Expert Help: Finally, smart buyers know they need to be even smarter—they become a team with a local expert agent who knows local property, pricing, lenders, and the best listing agents. A strong listing agent can be a critical advantage in seeing a distressed property through from contract to close.

So, bottom line—if you think you want to buy, have a talk with yourself first, check your financial readiness, and get with an expert and learn everything you need to know, in order to get what you want in this market.

Moving HouseThere are several ways to find foreclosures. First and foremost – Find a Realtor®. Realtors typically have access to the MLS and other lists from the banks Asset Managers. Other lists can be found on AllForeclosures.com as well as on specific bank sites.

Back to Top