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Foreclosed homes present
many opportunities …and many challenges.
Hope prices may look as if it is
lower, however this kind of homes are
almost certainly that will have to have lots of repairs before it will be ready for you to move in.
On the upside –if you will be willing to do your homework, you can get an excellent home at an excellent neighborhood
and good schools for a faction of what it otherwise would cost.
I customarily alert my clients about several things they should know and consider carefully before jumping on a foreclosure band wagon. Let’s take a look on some of the important points:
This is one of the instances that an experienced real estate professional can make or break the difference.
Negotiating this type of transaction does require some experience and do recommend that you select a REALTOR® early in the process.
It will not cost you a penny …and it may save you money ...but definitely will protect you from plenty of pitfalls and headaches
Buying At The Courthouse Steps
One the best moments to buy a foreclosed home is when it first goes to auction at the courthouse steps.
It is when the house can be attained at the lowest price.
However this option is for those buying “all cash.”
It is a quick moving procedure and lenders are still not equipped to make decision that quick.
If you have cash on hand, pre inspect the home you want to bid and had to county courthouse step on the first Tuesday of each month (as long as it is not a holiday).
It is a quite interesting thing to see.
Buying From The Bank
The majority of foreclosures will return to the original financial institutions that financed the house in the first place.
At this stage they will put the home back in the market as quick as possible because “banks are not in the business of owning real estate.”
In the process of “reacquiring” the house the bank also clear the title to extent that it becomes more marketable and, consequently, it is more likely to be approved for financing.
Most foreclosed homes are left with substantial damages and will require repairs before it can be inhabitable. FHA has a program that allows you to add some money for repair and add that amount to the loan. The program is called FHA-203K
VA (Veterans Administration) does not like to finance homes that will require extensive repairs and definitely will not back homes that will have repairs beyond the closing date.
Foreclosed homes will bring you back a quicker response because the bank has already taken the property from the home owner; however, if you can wait a while longer, short sales homes usually are in much better shape. To learn more, please click here to read my “HAFA Short Sale” page
Before you hit the road to pursue your foreclosed homes – do take the time to prequalify with a reputable lender.
Most of the good homes worth biding on will sell quickly – so it is preposterous for you to be looking for houses if you still do not have secured financing.
It takes a couple days or more for you to get that qualification back and it may already be too late.
Do yourself a huge favor: Get a prequalification behind – sometime it is emotional devastating to find a great house and loose for this simple thing – which you will need to do down the road any ways.
The “Multiple Offer” Conundrum
A good house when it hits the market at the right price or bit below, will attract many suitors …very quickly.
It is important to have that prequalification letter form you mortgage lender in hand and act on your offer as your decision is made …and you cannot take you sweet time to make that decision though.
When a house hits that “sweet spot” numerous people will be in hot pursuit and you may end up what I dread the most – a “multiple offers” conundrum (or the “bid wars,” if you prefer).
All the sudden the price goes ways beyond the initial “good” price.
I always caution my clients on two things:a) Do not get emotionally attached to the home until you have had your offer accepted be the seller… actually up to that point I do not call it a “home” but simply a “house” or a “condo” – if that is what we are working on.
I think that people do get attached to house and will up their offers and/or drop the concessions.
I warn you - be careful with your emotions.
Invariably foreclosed homes will call for repairs and/or upgrading.
Banks will not make any repair and they will not give any concessions like some for paint, carpet or missing appliances.
I have never seen an exception so please do not count on it.
Please factor in those needed repair as well as the extent that you would like to go consideration when placing your offer.
I recently visited some foreclosed condos with one of my clients. Prices seem to be very competitive, however some condos needed to be completely redone and others where date – almost all of them lacked granite counter tops and stainless steel appliances.
So please think carefully before placing your offer.
Notable exceptions are Fannie Mae and Fried Mac they a little “reconditioning” of their foreclosed homes before putting them back in the market …They will not do the most expensive or the ultimate reform, but it is ways better than anybody else in the market place
What to expect and to look for when buying foreclosures:
Quick response to your offer unlike Short Sales – your should have answer in 3 to 5 days
Bank already owns it …and wants to sell it as soon as possible
Good buys are out there - Many will have an equity …many are completely destroyed. I have homes where the previous owners have taken out light fixtures, appliances, door knobs, faucets and even the bath stoppers…
Abundant Inventory – foreclosures have always been around and nowadays the market is flooded with them.
Clear Title – you should not worry about it, if the sale goes through you will receive a good title.
Now it is YOUR turn: Please give us your input!
Do you have some great comments on this topic you would like to share? Any question burning on your head? I would love to publish
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JC Fagundes, Associate Broker
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