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Are Foreclosure Homes Cheaper

Consider Hiring A Real Estate Agent Who Specializes In Foreclosures

How to Find Foreclosed Homes (& Buy Them for CHEAP)

You don’t necessarily need a real estate agent in order to buy a foreclosure, but they can provide expert advice on foreclosures in your search area. They can also help you assess whether a foreclosed home’s asking price is worth the potential risks involved, such as budget issues or repairs.

If you know you don’t want to hire a real estate agent, start by searching for foreclosed homes online. You can also drive through neighborhoods to see if there are any homes for sale labeled “Foreclosure Property.” Make sure you research what other homes, both foreclosed and non-foreclosed, in the area sell for so you can see whether the property you’re interested in falls above or below that level.

It’s So Simple To Find The Best Real Estate Deals In Your Area With Foreclosurecom: It’s One Easy Search

And that search can be performed at the state, county and city levels even the exact address and/or zip code so that your house hunt hits the ground running. Once you start digging into the incredible foreclosure deals, each listing will be complete with asking price, exact location, number of beds / baths, property type , available photos, tax roll information, helpful neighborhood / school district details and so much more. Indeed, we provide as much information as possible so that you can make the most informed decision possible.

Veterans Administration Loan Program

The federal Veterans Administration has a mortgage guarantee program that is open to current service members, veterans, and surviving spouses. According to Military.com, the loans can be used to buy repossessed properties, although a bit of advance preparation is needed.

Benefits include zero down-payment loans, reduced closing costs, and a waiver of the mortgage insurance requirement.

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Research The Different Methods For Buying A Foreclosure

As with any major purchase, the first step in purchasing a foreclosed house is research. Thats because there are several different ways to buy a foreclosure, and the best method for you may vary depending on your needs.

Here are the most common purchase paths to consider.

Buying From The Homeowner

A pre-foreclosure, or short sale, can occur when the homeowner still owns the property and knows theres a potential for foreclosure. Owners want to sell their home before they end up in foreclosure. This means that short sales arent technically foreclosure sales.

Short sales can also prove to be challenging. In a short sale, owners get permission from their lender to sell their residences for less than what they owe on their mortgage. If the owners owe $180,000 on their mortgage, they might still list the home at $160,000 even though such a sale leaves them $20,000 short of being able to pay off their entire mortgage loan.

In some short sales, the owners bank agrees to take this loss as a way to get the home sold and the mortgage off their books.

The goal for the owners is to offer their home at a price thats low enough to ensure a quick sale before they fall behind on their monthly payments. Buying at this stage can be tough, though. Even if the sellers agree to your offer, their bank or lender might reject it if its too low.

Buying At An Auction

There are also plenty of risks:

Buying From The Bank

Buying A Government-Owned Property

The Pros And Cons Of Purchasing A Foreclosed Property

How Long Does It Take To Get A Foreclosed Home

Buying foreclosed properties can turn out to be an excellent real estate strategy, but the way forward can be tricky and full of pitfalls. If youre considering purchasing a foreclosed property, youre going to want to do plenty of research to ensure you wont end up getting more than you bargained for in all the worst ways. Heres some information to get you started.

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There Could Be Delays

Need to be out of your house and into your new one within a month or two? The foreclosure market is probably not for you.

Buying a foreclosure is more complicated than buying a traditional property. The foreclosure process includes waiting periods, which vary from state to state. If youre buying from a bank, there are often layers of approvals necessary along the way. If so much as a single signature is missed or a document isnt filed correctly, previous owners may be able to file for bankruptcy protection, which will stall or, perhaps, stop the sale. In some instances, post-sale legal issues can delay the closing for weeks or even months.

What Are The Disadvantages Of Buying A Foreclosed Home

There’s a downside to buying foreclosed homes. Here are common disadvantages:

Closing can take a long time: Depending on the reason the home went into foreclosure, it might take you several months to close on the property after you decide to buy it. If you’re in a hurry, or need to use the house as your main residence, time may not be on your side.

This is more true with a short sale. A short sale is different from a bank-owned foreclosure because the seller is not the lender in a short sale. The reason that short sales can take a longer amount of time to go through is because in a short sale, the seller needs approval from their lender to sell the property for less than the amount owed on the home. This third-party approval can take time to process.

Condition is usually “as-is”: This is the main disadvantage of buying a foreclosed home. The condition is often quite bad and you have to do your best to figure out how much it will cost to bring it up to par. Generally banks selling foreclosures are exempt from providing a buyer with many of the disclosures that you would otherwise get from the prior owner. That means a thorough inspection at the very least. Next, you’ll need to hire one or more contractors to give you estimates for repair work. Perhaps the roof needs to be replaced or there are plumbing problems.

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Hire An Expert Real Estate Agent

Steps No. 1 and 2 can be interchangeable. Many people, however, like to look at whats available first and determine what they want so they can find a local real estate agent who specializes in foreclosed properties.

Here are the types of homes youll come across that may be in the foreclosure process:

Get An Inspection And Appraisal

How To Buy Cheap Houses When The Market Is Expensive (Foreclosure)

Because the property may not have been well taken care of, its strongly recommended that you get a home inspection. A professional inspector will flag any problems with the homes structure or major appliance systems. If there are large issues thatd be expensive to fix, youll have to weigh the cost of repairs with the savings youre getting from purchasing a foreclosed home. A home appraisal will provide you and your future lender with a professional estimate of the homes value.

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Get A Home Inspection

Once again, keep in mind that youre buying a foreclosed home as-is. This means no one on the selling side is going to pay for any needed repairs. These repairs are your responsibility.

Because of that, its very important that you inspect the property as part of your offer process. And if the home inspection uncovers too many problems or problems that cost too much to fix, you might want to pass on buying the home.

Banks or government agencies will usually allow for an inspection contingency as part of an offer. This means you have the opportunity to order a home inspection after your offer is accepted but before the sale closes. Your home inspector will tour the residence looking for everything from leaks in the roof to evidence of a shifting foundation.

After the inspection, youll receive a written report detailing the inspectors findings. Youre able to walk away from the sale if there are too many problems. Foreclosed homes tend to offer little to no room for negotiation no matter what the inspection reveals.

Again, expect to spend more money on repairs for a foreclosed home. To get a better sense for the houses current state, find out how long its been unoccupied and determine if the previous homeowner performed routine maintenance on the home.

Its also a good idea to check with your local building department to find out if there are any open building permits that could present issues post-closing.

Establish Your Price Point

Before you start searching for a foreclosed home, you should think about what price range you want to stay within. Consider your monthly income, how much you spend on groceries, the average amount you can afford to put toward household bills, repairs and mortgage payments. This will help you determine what house price you can afford. From there, you can establish an overall price point to focus on.

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Tips For Avoiding The Pitfalls Of A Foreclosure Property

Buying any home is a big decision, but with foreclosed properties, the buyer is the one who assumes much of the risk. Although buying foreclosures can come with many downsides, there are several ways you can protect yourself from getting caught in a bad deal. Follow these simple tips to ensure your next foreclosure property purchase is worth the time, money, and effort you put into it.

Secure A Preapproval Letter

Buying Foreclosed Homes In Austin Texas

A mortgage preapproval indicates a lender has reviewed your financial status and agreed to issue you a loan up to a set amount, with a repayment term and interest rate based on a specific down payment. Preapproval attests to your ability to finance a purchase within the specified price range, and having one is practically essential when you’re competing with cash buyers. Plan on spending a fee of several hundred dollars for each preapproval, and be aware that a preapproval letter is typically only good for 60 to 90 days. Specific financing terms may change if interest rates increase or your income or credit score changes before you finalize your loan application on a specific purchase. If you’re not happy with the terms of your preapproval, take steps to improve your credit score and reduce your debt.

It’s possible to get a preapproval letter based on conventional mortgage lending terms and under the terms of any government-backed mortgage assistance program you qualify for, such as a Federal Housing Administration loan or a mortgage backed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture . Note that these programs spell out eligibility requirements on properties they’re willing to finance, and some foreclosures may not qualify.

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Disadvantages Of Buying Foreclosed Homes

Foreclosed Homes are Often Neglected

In real estate investing, property investors buy foreclosed homes âas is.â This is the worst thing about buying foreclosed homes because these are usually distressed investment properties. As a result, the real estate investor will have to do some improvements and repairs. While this will increase the investment propertyâs market value, it still would cost the property investor especially if the investment property is in a miserable condition. Thus, foreclosed properties could be a financial disaster for property investors if they donât do the proper financial planning!

This is when the importance of a home inspection comes in. The property investor should check foreclosed homes before making the purchase in order to estimate the repair costs. A home inspection will assure you invest in good foreclosed properties with the potential to make money and help you avoid hidden expenses.

High Competition for Foreclosed Homes

Not for Beginner Property Investors

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Risks And Rewards Of Buying A Foreclosed Home

The amount of risk and potential reward of buying a foreclosed home can vary depending on which part of the foreclosure process the home is in.

First, lets cover some of the risks of investing in a foreclosed home:

  • Theres a lot of competition to buy a foreclosure. Real estate investors, for instance, often bid cash for a foreclosed home to operate as an income property with no contingencies and no questions asked.
  • The condition of a foreclosure home isnt disclosed or guaranteed. Unlike buying a home listed on the MLS by a real estate agent, the bank isnt required to disclose anything about the property to a buyer. Thats why its important to learn as much as possible about the house before you bid.
  • Buying a foreclosed home doesnt always make sense. Just because a home is being sold at a foreclosure auction doesnt necessarily mean its a good deal. Some foreclosure homes have been completely trashed by the previous owner and require major repairs like new roofs or heating and air conditioning systems.

However, theres an upside to everything. Some of the rewards of buying a foreclosed home include:

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How To Know Whether A Foreclosure Is A Good Deal

A lot of the deal in a foreclosure comes down to you the buyer and the property’s condition.

Do you have people who can fill in your gaps in knowledge or skill? If you are purchasing the property at a time when you are able to examine it, don’t skip thorough inspections. You may not be able to inspect a property up for auction, but that doesn’t mean you can’t do a little private detective work to give you an idea of what you may be getting into. Drive by the property to get a sense of the neighborhood and to check the home’s condition from the road. Zillow also recommends checking for the assessed value for property taxes to see if it’s substantially less than others in the area, a possible indication of hidden issues. Get a trusted contractor or handyman to give an estimate on repairs both in terms of money and time.

In addition to your construction crew, you should enlist the help of an experienced real estate agent one with expertise in foreclosures and distressed properties. This person can help you find properties before and after they hit the auction block as well as help you compare property prices in your area to see which ones actually constitute a good deal.

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Look At Comps To Determine What To Offer

How to Find and Buy a Foreclosed Home

Finding the right price to offer is as much an art as it is a science. Your agent can run a comparative market analysis , which helps you understand recent sale prices of comparable properties, or comps.

Soffee says he runs a CMA from the last 180 days and evaluates several factors, including the pace of home sales, tax assessment history and a deeper analysis of similar properties nearby that have recently sold.

If youre up against cash offers, knowing this information can help ensure your offer is a competitive one. Your lender will require an appraisal to assess the homes value, so keep that in mind when making your offer, as well. If theres a shortfall between your offer and the homes appraised value, you might have to make up the difference in price if the bank doesnt budge.

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Financing Options For Foreclosed Homes

Private lenders tend to be skittish about financing foreclosure deals. However, several government-sponsored financing options are available for those who qualify:

  • 203 loans from the Federal Housing Administration ,
  • Fannie Maes HomePath ReadyBuyer program,
  • The HomeSteps program through Freddie Mac.

Buy At A Trustee Or Sheriff’s Auction

You can find notices of auctions online and in local newspapers. There are a number of websites that post information on auctions, and some might offer free trials. You typically pay in full at public auctions and buy the home in “as is” condition. Smart buyers will pay a title company to do a preliminary search prior to bidding.

If there are liens such as taxes, delinquent homeowners association dues, or superior loans, those encumbrances stay with the home. There could be a number of professionals and investors at public auctions who can reduce your chances of winning a house.

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A Bank’s Foreclosure Strategy

When a bank-owned home comes on the market as a foreclosure home, it can attract many buyers if it’s priced attractively. Say, for example, the bank wants to sell the foreclosure for $250,000. The bank might price that home at $240,000, hoping that buyers will easily see the home is priced far less than it is worth and be drawn like moths to a flame. Underpricing is one way a bank can get multiple offers for a foreclosure home.

The problem that can arise is sometimes agents don’t do a very good job explaining to potential buyers why underpricing occurs and how to make underpricing work for the buyer’s benefit.

Get A Mortgage Preapproval

Two foreclosed homes get revamped in Cleveland

A mortgage preapproval is necessary in a hot market and lets owners know that youre capable of purchasing the property. A preapproval also provides you with a stronger negotiating position when it comes time to find the best rate and finalize your loan.

If youre interested in a foreclosed home because finances are tight, there are tons of programs that could help you.

  • Government-backed loans typically have lower qualification requirements:
  • Fannie Maes HomePath Ready Buyer program
  • Freddie Macs HomeSteps program
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