Foreclosure homes aren’t flooding the market nearly as much as they were ten years ago, but they do still occur and they can be a great way for buyers to break into homeownership in competitive areas like Denver. While it’s true that buying a foreclosure is a little different than a regular home purchase, it’s not that challenging of a process if you know what to expect. Take a look at the pitfalls below so you know what to avoid when purchasing a foreclosure property.
- Not having your finances in order
With any home purchase, it’s important to know what you can afford before you start shopping. If you plan to pay through a mortgage, having your financing lined up is one of the best ways to prove to the seller that you’re a serious buyer and increase your chances of having your offer accepted. When you’re buying a foreclosure, taking this step is crucial as banks will expect to see a preapproval letter with your offer.
- Buying a foreclosure sight unseen
If you skip an inspection you won’t know what shape the home is in until you get the keys. At that point, any unexpected costs are yours to cover, from small cosmetic upgrades to significant repairs.
- Not knowing your repair/renovation budget
Some foreclosure homes have sat empty and neglected for months, with dead lawns, peeling paint and other relatively minor problems. Others are so trashed that you can’t live in them before making repairs. For $300 to $500, a home inspector can help you spot many of the problems and give you an idea of what it will cost to make the house livable.
- Not knowing what comparable homes are selling for
Your realtor will be able to provide numbers on what other foreclosure properties in the area are selling for. You might not always be able to tell the condition of the homes that recently changed hands, but you will be able to establish a range of prices, a typical price per square foot and an average price.
- Not knowing what to bid
Set a firm maximum price that’s within your budget and near the property’s actual value. Be prepared to walk away if the bank won’t accept it. And don’t forget to factor in closing costs if you’re getting a mortgage.
If you’re ready to check out foreclosure options in the Denver metro area, contact Metrowest. We specialize in these types of sales and would love to help you start the process.