Buying A Foreclosed Home is not always a deal.
- Many home buyers are under the impression that Buying A Foreclosed Home is always a deal
- There are times when homebuyers can get a good deal
- However, many lenders who list foreclosed homes normally do their homework before listing it on the market
- Many homebuyers who do their due diligence can often purchase a foreclosed home at a discount
- The market is very competitive
- Many buyers need to compete with professional real estate investors with cash money to purchase
- There may be dozens of bidders on homes that are in foreclosure
- There are also risks involved with buying a foreclosed home
- Homebuyers should inspect the foreclosed home they want to purchase before putting in a purchase offer
- There can be many hidden problems in foreclosed homes such as cracked foundation, mold, defective electrical and plumbing, and other defects due to the home being neglected
In this article, we will discuss and cover Buying A Foreclosed Home For First Time Home Buyers.
Buying A Foreclosed Home At A Price Reduction To Other Comparable Properties
When a foreclosed home hits the market, it is normally listed at market price.
- Lenders do not want to give a foreclosed property away
- However, as time passes, the lender may instruct the listing agent to lower the market price
- The days of foreclosed homes selling at a huge price reduction are long gone
- Homebuyers need to make sure there are benefits when buying a foreclosed home
- One of the main benefits is buying it at a discount
- Many homes that have been foreclosed may need gut rehab or major renovations
- There may be many hidden issues with electric, plumbing, well, septic, and/or other major renovations that may be required
- Foreclosed homes are homes that the previous homeowner defaulted on their mortgage
- The lender had to legally obtain the property due to the homeowner defaulting on their mortgage payments
- Make sure you study the market value of comparable homes in the area prior to putting an offer in a foreclosed home
- Also, get an estimate on the cost of the renovations needed to make the home appealing and/or marketable
There are many instances where buying a foreclosed home does not make sense.
The Process Of Buying A Foreclosed Home
In this paragraph, we will discuss and cover on how to purchase a foreclosed home.
- Buying a home that has been foreclosed is similar to purchasing a regular home
- The owner of the property is the lienholder which is normally a bank and/or lender
- There are various stages of the foreclosure process
Buyers should first determine what stage of the foreclosure the home is in.
Frequently Asked Questions When Buying Foreclosed Homes
Here are some of the questions that need to be answered:
- Has the property been fully foreclosed?
- Was the property sold at a sheriff’s sale?
- Are there people living in the home like squatters?
- Is the property in pre-foreclosure which means the lender has notified and served the homeowner of the impending foreclosure?
- Is the homeowner trying to sell the property before the lender finalizes the foreclosure?
- Is the property a short sale?
- One thing homebuyers need to know about buying a short sale home is it takes substantially longer than a regular home purchase transaction
- A short sale is when a lender is willing to accept a discount on the mortgage balance
- This is because the value of the property is lower than the market value of the home
- A short sale home purchase may take anywhere between four and eight months to close when regular home transactions only take 30 to 45 days
Every step in the short sale home purchase process needs lender approval.
Seller Of Foreclosure Properties
Buyers should know who the owner of record is when buying a foreclosure home.
- There are homes that are bank-owned properties
- Bank owned properties are also referred to as REOs
- If a property goes to a sheriff’s sale and it does not sell to a winning bidder, the property will become a Real Estate Owned property which means is owned by the lender
- If a homeowner defaults on a federally government-back mortgage such as FHA, VA, USDA, the government owns the property of the home if the borrower defaults on their government loan
The government agency is the agency that owns the home and is responsible for selling it through real estate agents.
Hiring An Experienced Real Estate Agent To Represent You
It is best recommended that you hire a local experienced realtor who is knowledgeable not just with foreclosure homes but also the area.
- A local veteran experienced real estate agent who knows the area is key when buying a foreclosed home
- The chances are they will know other realtors in the area
- Your realtor will guide you on how much your offer should be
- The realtor will also get you a market analysis of the area
- Your real estate agent can also refer you to a local contractor who may give you an estimate on how much it will cost to renovate the home
- Make sure you get the home inspected thoroughly
- The property needs to pass home appraisal if you are planning in financing the foreclosed home
- If you need an appraisal, make sure the property will pass the basics prior to entering into a home purchase contract
Hire an experienced reputable home inspector.
Pros And Cons In Purchasing A Foreclosure
The biggest pro in buying a foreclosed home is buying it at a large discount. Buying a foreclosure is no different than buying a standard home. Some of the negatives is a lot of competition. You may be competing with cash buyers. If you are buying a short sale home, the process can take months. Most foreclosed homes will be in need of repairs. However, buying a foreclosed home can be rewarding because of getting it at a lower price.