Looking at Buying a Foreclosure?
Get pre-qualified with a lender of your choice. The very first step in buying any kind of property is meeting with a lender and making sure you are comfortable with your proposed monthly payments and loan amounts. In the case of foreclosures all lenders require that all offers presented are accompanied with a pre-qualification letter.
1. Choose a foreclosure sale expert. Lenders rarely sell their own foreclosures directly to consumers. They list them with real estate agents. This is why it is important to have a buyers agent represent you as a buyer. The best thing is that it is FREE! If you choose to use another agent, ask them which lenders’ homes they’ve sold, how many buyers they’ve represented in a foreclosed property purchase, how many of those sales they closed last year, and who they legally represent. I am happy to answer any of these questions as nearly 75% of my business is in the foreclosure side.
2. Be ready for complications. Ask your agent to recommend a real estate attorney who has negotiated with lenders selling foreclosed homes and has defended legal challenges to foreclosures.
3. Set a price. I can show you closed sales of comparable homes, which you can use to set your price. In some cases the lender has either over estimated the value of the home or they have severely undervalued it!
4. Get your financing in order. All foreclosures that I have done require buyers to submit financing pre-approval letters with a purchase offer OR some kind of proof of funds if you are paying cash. Since most foreclosed homes are vacant, closings can be quick. Make sure you have the cash you’ll need to close your purchase.
5. Expect an as-is sale. Most homeowners stopped maintaining their home long before they could no longer make mortgage payments. Be sure to have enough money left after the sale to make at least minor, and sometimes substantive, repairs.
Although lenders may do minor cosmetic repairs to make foreclosed homes more marketable, they won’t give you credits for repair costs (or make additional repairs) because they’ve already factored the property’s condition into their asking price.
Lenders will also require that you purchase the home “as is,” which means in its current condition. Protect yourself by ordering a home inspection to uncover the true condition of the property, getting a pest inspection, and purchasing a home warranty.
