The Ins and Outs of Buying Foreclosed Properties: Is a Foreclosure right for you and your situation?
Everyone likes a good deal, especially when buying real estate. Many buyers look at foreclosures for a good deal. Foreclosures are properties that have been repossessed by the lender due to non-payment by the previous owners. The lender then takes ownership of the property and puts the home for sale to try to recoup the money they have invested in the loan and legal fees. Buying real estate at a discount is great, but foreclosures are certainly not the right fit for everyone. Keep these things in mind if you’re looking into buying a foreclosure:
Attractive Price – Many foreclosures are priced under market value and are very attractive to home buyers. Of course, the lure of that cheaper price may be a great reason to buy, but there may be other costs associated to consider as well. The price may be great for that neighborhood, but not if you will be over-invested after repairs. Be sure to keep the overall investment in mind, not just the purchase price. The best advice on making an offer on a foreclosure is to come with you strongest offer. Many foreclosures receive multiple offers because the lower prices attract many buyers. Keep in mind, there are no emotions in this deal, the seller is a bank and is only looking at the numbers and for the offer with the highest likelihood of closing. To improve the chances of your offer being selected, bring your best purchase price, avoid contingencies, offer the fastest closing you can and show proof of funds or loan pre-approval. You may only have one shot at it, so be sure it’s a strong one!
May Need Work – Typically, foreclosures are 100% as-is purchases. That means that the bank does not make any repairs on the property—it is sold as it sits. What you see (and what you can’t see) is what you get. There may be damaged, vandalized or missing components. Factor these repairs into your offer, because you are buying the good and the bad. If you can, include an inspection contingency with your offer. It can vary, but the buyer may be responsible for turning on any utilities for an inspection. Yes, this is a pain, but it is worth it. An inspection on a bank owned home will be mostly for informational purposes, as they likely won’t do any repairs; but the more information you have, the easier your decision will be on whether or not this is the “deal” you thought it was.
Be Patiently Waiting – Unlike a traditional purchase, a foreclosure typically has a bit longer time frame on some aspects of the process. It can be frustrating, even when you know it will be slow going in. Asset managers for the banks oversee many properties, so sometimes it takes awhile before you have a response to your offer. For investors, this is less of an issue; but if you plan to live in the property, the timeline to closing may be an important factor in your decision.
Foreclosures can be a great way to buy a property for less than retail. The buying opportunities range from all price ranges and all conditions. It may be a great fit for you, or it may not; but you never know until you go check it out, as every house is different. Before you fall in love with a foreclosure, make sure that you are prepared for the process.
Lisa Priest loves a good deal and is an East Texas Area Broker with Picket Fence Realty, Inc. You can reach her via phone or text at 903-948-3343 or read more at BuyPalestine.com