Why Buying a Foreclosed House My Be Your Best Bet As a Home Buyer
The housing market is cyclical and it currently is on a gradual rebound from the real estate collapse of 2008. The number of foreclosed similarities is fewer than a few years ago, but there nevertheless are opportunities to buy a foreclosure at a respectable price.
Don’t know what you’re doing, don’t buy
Buying a foreclosed character is not for those who haven’t studied the foreclosure course of action as fully as possible before shopping for a foreclosure (aka real estate owned, REO, bank-owned). Study obtainable online information, take community college courses, and attend seminars on investing in foreclosures.
Line up your financing ducks
The next step toward purchasing a foreclosure is to develop a detailed budget. Determine the absolute maximum you are willing to use, including mortgage, character taxes, and insurance. Include some funding for possible repairs.
Then research REOs in your real estate market of interest.
Many foreclosed homes are in need of at the minimum some rehabilitation. How much are you willing to use on repairs? Are you planning to do the sweat equity or will you need to hire a contractor and crew to do the work?
Now look at your budget and list what you can provide to put into a down payment and earnest money. Will you have to take out a home loan?
Having the financing lined up before you place your bid on a foreclosure indicates to the selling financial institution that you are a serious buyer. Be aware that most REOs require this information along with your offer.
Be prepared to honor your budget and if the deal doesn’t come in under your limit, be prepared to walk away.
Some REOs are priced over market value. Know what like similarities are selling for in the area. Several online real estate organizations list “comps” for the character in which you are interested in addition as similar similarities.
The REO bank typically doesn’t offer disclosure on a foreclosed character. Some homes are in terrible, already uninhabitable, condition. DO NOT consider, much less place a bid on, a foreclosure without first having a thorough character inspection completed by a licensed inspector. And be very careful of any character that is listed considerably below market value. It may be hiding some serious issues.
Don’t go it alone: work with a real estate agent who has plenty of experience with foreclosures.
The good deal
A good deal in an REO character is one that needs little if any restoration. Or, it could be the rehab character that falls well within your budget and financing.
A stronger deal is the one for which you can pay cash. Be prepared to act quickly. Bidding wars on a desirable character can be shared. Don’t lowball your offer. Make it clean, in cash (if possible), with few or no contingencies, and a quick close.
The best bet on a foreclosed character is the one for which you prepared – already before you began your search.