The Abcs Of Buying A Foreclosed Home
Foreclosed properties can be one of the greatest bargains around
, and right now there are plenty of them. The number of properties in foreclosure is estimated to be about 3% of the total homes in the U.S. today.
It is a sad fact for some, but it may be a great opportunity for others.
Step number one is to contact a real estate agent specializing in these types of properties. Lenders that are in possession of foreclosed properties usually like to work with a chosen group of real estate specialists. You might even be able to take a foreclosure tour with one of these specialized real estate agents.
Foreclosure auctions may seem like a good notion, but you do not get to inspect the home in advance, putting you at a disadvantage. Buying a foreclosure through a real estate agent is similar to any type of house purchase, in that you can inspect the home and estimate how much you may have to invest to bring it to what you desire.
There is a wide range of foreclosed homes, some of which have been badly damaged, either willfully by angry owners or by lack of care, and others which just need a little TLC. Many people who look for homes in foreclosure ask a contractor to look at the home with them so that they can have a good idea of the cost of repairs.
The next step is to look at the "comparables" in the area to find out what a house like this would cost, without damage. Comparables are the prices that similarly sized homes in the same area have sold for recently. (Despite the real estate crisis, some sellers are overly optimistic about the value of their house.) You want to make sure you know how much the market values the home, not the owner. At this point, you can subtract your costs of repairs from that price.
Keep your bid low. Remember, if you wanted to pay full price, you could have bought a non-foreclosed home. The real estate agent will probably have a good concept of how low the seller can go. In today's market, right now is likely the optimum buyer's situation, a seller who does not want to own the house under any conditions, is losing a lot on it, and has even more houses to get rid of.
Between the estimates and how much it will cost to repair, you should come to a fair value. Since you are looking at a foreclosure, you can to expect to get a bargain.
In terms of your mortgage, be sure to apply for enough to cover repairs as well as the sales price. If you have a large deposit available, consider lowering it to keep funds for the repairs.
A HUD 203K loan is an good idea for borrowers of foreclosed properties, since it will give you a mortgage to cover both the purchase price and the repairs.
Just as you would if you were buying any house, get your financing lined up ahead of time, and get a pre-approval letter from your lender. This puts you at a great advantage in bargaining for the property.
Remember that there are lots of foreclosures today, so there is no need to pay too much or to settle. As the number of foreclosures continues on the rise, you have plenty of time to take advantage of a foreclosure deal.
by: Erline T. Linn
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