How to Buy Foreclosures
There are multiple roads to homeownership and some people take the route of buying foreclosures in an attempt to save money. Foreclosures are homes seized by the bank because the owner had financial issues.
There are at least two reasons why it makes sense to buy foreclosures. One, if two loans were used to buy the property, the second lender sometimes does not foreclose. But if the second lender does not make up the back payments to the first lender and commence its own foreclosure proceedings, the second lender gets wiped out. Usually, the second mortgage is 20% or more of the property’s original market value.
Two, the bank wants to move its inventory and thus often price the home at a significant discount. If it did not receive a minimum bid during the foreclosure sale at the courthouse, chances are it will be sold for a lower price just to get rid of it.
Enlist the help of a buyer’s agent
Hire a buyer’s agent to represent you in negotiations with the bank. It can be difficult if you are inexperienced and getting a qualified real estate agent is just more convenient. Interview a few candidates and select the one you connect with the most. Some important things to keep in mind:
- The buyer’s agent must protect your needs.
- The buyer’s agent does not represent the seller even when the seller pays the commission.
- The seller pays the buyer’s agent, which means it costs you nothing to hire a buyer’s agent.
- The buyer’s agent may ask you to sign a buyer’s broker agreement that specifies duties and payables.
- Hire a buyer’s agent that specializes in buying foreclosures.
Start negotiating with the bank
Below are some tips on how to get the most value when you buy foreclosures:
- Make an offer for homes that have been listed on the market for over 30 days. If a home is new, the bank is less likely to deviate from its asking price.
- Ask for a home inspection before you make an offer. You are buying the home as is so check it first and see how much it has been stripped.
- You may be asked to submit a loan application to prequalify you. But you can get the loan from any bank you want.
- Be patient. Sometimes it takes 10 days before you get a response from the bank.
- If your offer gets rejected, wait for 30 days and resubmit yor original offer with a new date inserted.
- Ready your loan preapproval letter from your own lender before submitting an offer and get assurance that you will receive the financing from your lender. There is a penalty for each day you go over your predetermined closing date.
The more you prepare in advance, the easier it will be to buy foreclosures. Some unexpected fees may arise during the transaction so ready your wallet and have the financing in the bag. Always be patient and know what you are buying. Of course, you want to obtain the best foreclosure for your money’s worth!