Many people consider distressed housing as part of their home search options, especially in very competitive areas or those with lower housing inventories. If you’re thinking of expanding your search to include foreclosed homes, it’s possible to find a great value. That is if you know what to expect. Check out the five steps below on buying a foreclosure to see if this option is right for you.
1. Find a real estate broker and lender –The goal of combing through foreclosure listings is not to find a house; it’s to find an agent. Banks usually hire real estate brokers to handle their REO properties, or “real estate owned.” This signifies that the property has been foreclosed on and the lender now owns it and is selling it.
2.Get mortgage pre-approval- Unless you plan to pay cash, you’ll need a recent preapproval letter from a lender. The letter will detail how much money you can borrow, based on the lender’s assessment of your credit score and income. Don’t think you can find the home first and then secure financing – these types of properties go quick
3. Check comparable properties- There’s no rule of thumb on what the bank’s bottom line is on price. Just as with any other real estate purchase, you have to evaluate the recent sales prices of comparable properties in the area. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours.
4. Bid the higher price if homes are selling quickly- If the foreclosed homes you’re looking at are selling swiftly, the best advice on a bank-owned property is to come in at your highest and best.
5. Remember, the home is sold as-is- Keep in mind that foreclosed houses generally are sold as they are. That means that you shouldn’t expect to get a discount to compensate for repairs.
Keep in mind that foreclosed houses generally are sold as they are. That means that you shouldn’t expect to get a discount to compensate for repairs.