You may have heard on TV or radio, from your friends, from newspapers, magazines or the internet that there are some really good bargains out there in the foreclosure market. In fact, you see some ads about people purchasing homes for 10¢ on the dollar. They are even willing to sell you the information on where you can buy foreclosed homes and properties. But there are some things that they don’t tell you. Here are some of them:
You don’t have to pay for a list of foreclosures in your area – you can get this information for free in several ways. You can go to each banks foreclosure sight on the internet. Or, you can go to a Realtor® and he or she will do the work for you.
You get what you pay for – you may pay only 10¢ on the dollar but that is what the property is worth in today’s market. You get for that price because nobody would pay more.
Most foreclosed upon properties are distressed – In one form or another almost every foreclosed property is distressed, or has problems. They usually need work and many do not qualify for an FHA loan without significant repairs made. Sometimes it might only be repainting, carpet replacement and appliances replaced. Very often there is extensive work required to make the home live-able.
Cash is king – In the foreclosure market the cash buyer typically has the advantage. The bank or other owner of the foreclosed property will usually accept a cash offer over one that needs financing or appraisal approval.
Don’t just get pre-approved, get pre-committed – After cash, the purchase that has pre-committed funds is next in the pecking order. This means that if a loan is required, the lender has already committed to lending the purchaser the money. The only contingency is that the property meets the appraisal requirements. This is beyond pre-approval, where a credit check has been performed and the lender has determined that the client may be eligible to get a loan. And, it is certainly way beyond a pre-qualification which is not much more than recognition that the buyer is still breathing.
Don’t expect a quick response to your offer – most banks will wait for some time before responding to an offer. They are hoping for multiple offers to come in and will wait for that to happen. When they get multiple offers they will then issue a call for “highest and best” offer and will give a deadline for those to be received. Even if there is only one offer they will wait and then either negotiate or ask for highest and best.
You may have to offer, or pay, more than the asking price – Yep; this is a big surprise for many people. You may have to offer more than the asking price, especially when there are multiple offers on the same foreclosed property.
You will get special conditions from the bank before the offer is accepted – Most lenders of foreclosed properties will have special conditions or stipulations for the sale. This may require using a specific closing attorney that might be hundreds of miles away. It will almost always include a shortened due diligence period, the period you will need to perform all inspections, of the property, etc. They may even want you to be approved by a specific lender, although you won’t necessarily have to use that lender. The lender may, or may not, negotiate these conditions. So, if you have a particular attorney you would like to use to close with, you can attempt to negotiate that but don’t expect to have it happen.
Get your financing commitment before you start looking – Get that commitment for funding before you even start looking at a foreclosure. If you find one that you like, very often others will also like it. The best ones don’t stay on the market very long. Get that pre-commitment so that you don’t lose out on an opportunity by not being ready with all your financing requirements taken care of.
You can get renovation funds included in your loan – There is more likely than not going to be problems with a foreclosed home. It is possible to get a loan that will include funding to make any repairs/renovations required to bring the property up to standards to meet the loan eligibility. You can even add that deck, granite countertops, whatever renovations that you would like to make, if you qualify. Check with your lender on the programs available.
Work with someone familiar with the process – This is a strong recommendation. Work with a Realtor® that will guide you through the entire process and know the best ways to get you the property you want, whether for your own home or for an investment.
Armed with the above list, go ahead and look for that foreclosed property. You might not find your dream home, but you might very well find the home that you can make into the home of your dreams. And above all, be patient. You might not, probably won’t, win the first one, but keep it up, it will happen.
Note: This is not to be construed as financial advice or legal advice. Please check with an attorney for any legal recommendations and with a qualified lender for advice on getting pre-committed.
For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.
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