Foreclosurecom Delivers The Best Real Estate Deals First Well Before They Hit The Mass Market
As you know, perfect timing not just “location, location, location” is critical when it comes to purchasing a new home and/or investment property at the right price. That’s because competition drives prices up. At Foreclosure.com, we target low-priced distressed deals bank-owned homes, government foreclosures preforeclosure listings, real estate owned properties and foreclosure auctions, among others and pass them onto smart homebuyers .
Is A Foreclosed Home The Best Option For You
Foreclosures present a great opportunity for homebuyers looking to save money and invest in rehabbing a property that may have been neglected. But foreclosed homes are not for everyone. Be sure you understand how to buy a foreclosed home and all of the risks involved before you get in over your head.
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Why Foreclosed Homes Are Cheaper
The biggest selling point of a foreclosed home is, of course, its marked-down priceoften significantly lower than similar properties in the same area .
Most foreclosures are sold at a sizable discount from , with the exact amount varying from region to region. The seller may offer additional incentives such as a reduced down payment, lower interest rate, or the elimination of appraisal fees and some closing costs.
What makes these properties such a deal? If the residence is in the pre-foreclosure or short-sale stage, its owners are in a financial bind, and time is not on their side. They have to unload the property and get what they can while they can before they lose possession of it.
In short, these sellers arent negotiating from a position of strength and, while it may seem cruel to take advantage of their misfortune, a buyer can benefit.
The buyer can benefit even more if the property has been seized. The sheriffs office isnt interested in hanging onto a house, and banks dont want to be in the landlord business. Financial institutions typically want to rid themselves of foreclosed properties promptly. They need to get a reasonable price they have to answer to their investors and auditors. Still, buyers have an edge.
You should know that foreclosed homes are usually sold as is. If theres damage, repairs by the owner arent part of the equationbut, as used-car and vintage furniture aficionados know, as is translates into a discount.
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Purchasing A Foreclosed Home
If buying from a bank, youll need to sharpen your bargaining skills and start with a lowball offer on the property you want.
Banks that have accumulated sizable inventories of foreclosed properties will be more inclined to negotiate on price. The longer the bank has held the property, the greater the odds that it will seriously consider low offers.
You could make an initial bid at a price thats at least 20% below the current market price, or even more if the property is located in an area with a high incidence of foreclosures.
If you can pay for the property and any necessary renovations in cash, youre in an enviable position. Thats why some buyers decide to team up with outside investors who can help them out on the front end and share any profits when the home goes on the selling block once again.
In fact, cash deals represent a sizable portion of REO sales.
Look At Comps To Determine What To Offer
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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Foreclosure Listings Government Sites
HUD.gov. Potential investors and other home buyers can find one- to four-unit residential properties that the Department of Housing and Urban Development acquired from foreclosure actions on FHA-insured mortgages.
USDA-RD/FSA Properties. The United State Department of Agriculture-Rural Development and the USDA-Farm Service Agency list properties on this website. Here, youll find a small number of single- and multi-family homes, farms, and ranches.Buyers should contact the local USDA-RD office for more information on the property and how to buy it.
IRS Seizures. This Internal Revenue Service website is a portal to finding homes and other property seized by the tax agency for nonpayment of federal taxes.
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.
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How To Find Foreclosed Homes For Sale
Finding foreclosures can be rewarding, yielding diamonds in the rough or real-estate fortunes sold below market value. Here are some ways to find foreclosed homes.
A Note About Purchasing Through Short Sale
A short sale occurs when the homeowner sells a home for less than what they owe on the mortgage because the value has declined. Foreclosure has not been completed with a home up for short sale. The homeowner still owns the home so you work through their REALTOR®.
When you buy a home in a short sale, the lender needs to approve your offer. You might spend a lot of time waiting for approval.
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Get A Preapproval Letter
Preapproval letters detail how much money you can borrow based on the lenders thorough assessment of your finances, including credit score and income. Its always good to be prepared, Sklar says. Having your proof of funds will make it an easier transaction.
Youll also want to consider what kind of loan to get preapproved for. Foreclosed properties often require repairs or upgrades, and an FHA 203 loan can help. These loans allow buyers to finance up to $35,000 for repairs.
Foreclosures often get scooped up by real estate investors who pay cash. But dont let that discourage you many lenders will help you find the right financing to buy a foreclosed home. Find a mortgage lender who understands your goals.
Review Your Appraisal And Home Inspection Carefully
Once your offer has been accepted, you’ll proceed to the next two hurdles: the home appraisal and inspection.
Unless you’re paying in cash, your lender will require an appraisal to ensure the home’s value aligns with your offer. If you’re paying in cash, you might consider ordering an appraisal to ensure the property you’re buying is worth its selling price.
Even more important, though, is the home inspection. As a buyer, it’s your responsibility to order a home inspection — this step is critical with a foreclosure. You’ll want to know about every potential issue because there’s a strong chance you’ll have to buy it as-is.
“Many banks and HUD will sell properties ‘as-is’ and will make no repairs after the sale,” says Bhatt. “But some banks will consider repairs after inspection and more so after appraisal, especially if they are lender-required repairs.”
Review your inspection results carefully to decide if the issues found are worth the discount you’re receiving on buying a foreclosure. Attempt to negotiate repairs for anything major, but be prepared to walk away if the damage is too extensive.
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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.
The Bottom Line: Consider Purchasing A Foreclosed Home
If youve dreamt of making the move to homeownership but your budget is tight, buying a foreclosed home might be the right choice for you. Its possible to find foreclosed homes that are being offered at below-market rates.
Again, dont rush into this decision. Its best to work with a real estate agent who can explain both the pros and cons of buying a foreclosed home in your community. And before you make an offer, be aware of the additional risk you might be taking on when you dip into the foreclosure market.
Already on the search for a foreclosed home to purchase? If youre not sure how to budget for a mortgage, use our mortgage calculator to estimate how much principal and interest youll pay each month.
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If you don’t have a home picked out yet, your best guess is fine.
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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.
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
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Hire A Real Estate Agent
Most lenders hand foreclosed properties off to an REOagent who works with standard real estate agents to find a buyer.
Not every real estate agent has experience working with REO agents. A qualified foreclosure agent can help you search for foreclosures, navigate your states REO buying process, negotiate your price, order an inspection and make an offer. Research real estate agents in your area and connect with an agent who specializes in foreclosure sales.
Buying A Foreclosed Home: Pros And Cons
Buying a foreclosed home is a personal decision. It depends on a variety of factors, including your risk tolerance, the propertys potential reward, financing and your ability to move quickly. In many cases youre also benefiting from someone elses misfortune, which can be a deal-breaker for some people. Here are some pros and cons to consider.
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Find A Knowledgeable Foreclosure Agent
If you’re thinking about buying a foreclosed home, choose your real estate agent carefully.
“An agent who knows how the process of buying a foreclosed property works will be very helpful,” says Santosh Bhatt, a broker at Greater Louisville Homes in Kentucky. “Understanding the process allows the agent to manage buyer expectations. An agent with a lack of foreclosure experience can make the transaction a bit challenging.”
Look for agents in areas with high foreclosure rates or ask your lender if they partner with any REO agents. It can also be helpful to search for agents with Short Sales and Foreclosure Resource or Certified Distressed Property Expert certifications.
Looking For Your Next Home
VRM Mortgage Services helps revitalize and prepare homes for sale on the real estate market & helps real estate buyers via an innovative offer management platform. The real estate offer management platform improves transparency in the real estate transaction process between the home buyer and home seller, reducing the time needed to buy your dream home.
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Get An Appraisal And Inspection
Inspections and appraisals are both crucial when it comes to buying a foreclosure. An appraisal is a lender requirement that lets you know how much money a property is worth. Lenders require appraisals before they offer home loans because they need to know that they arent lending you too much money.
A home inspection is a more in-depth look at a property. An expert will walk through the home and write down everything that needs to be replaced or repaired. Because foreclosures usually have more damage than homes for sale by owner, you should insist on an inspection before buying a foreclosed home.
Sometimes, you dont get the chance to order a home inspection or appraisal before you buy. You should only consider buying these types of foreclosed properties if youre advanced at home repair.
Benefits Of Buying A Foreclosed Home
- Lower prices: One undeniable benefit is that foreclosed homes almost always cost less than other homes in the area or they are listed below market value. This is because theyre priced by the lender, who wants the home off of their books.
- Standard loan configurations: You might have to follow a slightly different bidding and buying process when you buy a foreclosure, but you still have a few loan options as long as its not a cash-only auction. As long as the home youre considering is in livable condition, you can get a conventional loan or a government-backed VA loan, FHA loan or USDA loan to buy it. Government-backed loans can make homeownership more affordable, but you if the property is damaged, the government may require work to be done.
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