What All Buyers Need to Know About Buying a Foreclosed Home
When lenders repossess a property through foreclosure, they’re looking to sell the property as soon as possible. However, because lenders are not exactly experts in selling, they enlist help from real estate agents to market foreclosed properties. While purchasing a foreclosed house through multiple listing services can save you a tone of money, it can also turn into a nightmare. That said, below are tips to ensure that you get a real bargain:
Make sure that your financing is ready to go
Majority of market players, such as the Federal National Mortgage Association or Fannie Mae, require that purchasers submit mortgage preapproval letters alongside their purchase offer. Most will reject contingencies. Because most foreclosed properties are vacant, expect closing to be very quick so that you will need to have the money you need to close the sale should you win it. Consult with a loan officer from a top mortgage firm in Utah to be clear about this.
Work with a foreclosure expert
You can look around for real estate brokers who specifically sell foreclosed properties for lenders or agents who can hunt foreclosed houses for you. Once you have your shortlist of candidates, ask to see their portfolio, specifically how many clients they’ve worked for that involved foreclosed properties, how many foreclosed properties they’ve sold for lenders, and how many of those transactions they’ve competed in the past year at least.
Figure out how much you can comfortably afford
Ask your broker to show you completed transactions of comparable properties to help you work out how much you can expect to spend on a foreclosed home. Begin with a price that’s significantly under market value since the lender will probably in a hurry to sell the property.
Be prepared to purchase an “as-is” property
Majority of homeowners naturally stopped doing regular maintenance on their houses before they can no longer afford to pay their monthly mortgage payments. That said, make sure that you have ample money to do at least some small repairs if you purchase a foreclosed property. While lenders might make some cosmetic repairs for staging the property for potential buyers, they won’t make extra or major repairs since they have already factored in the “as-is” or current condition of the property into the purchase price. To protect yourself, order a professional inspection to determine the property’s true condition, get environmental and pest inspections, and buy a warranty as well.
Expect some complications
Some states allow former owners of foreclosed properties to challenge the sale even after you’ve successfully completed it. While this isn’t that common, it’s best that you work with a real estate lawyer with ample experience in foreclosure so that you can learn about the foreclosure laws in your state and potential risks of buying a foreclosed property.
Put simply, while there’s money to be made with buying a foreclosed property, you must know and understand exactly what you’re getting into and select a property carefully. In addition, research your funding options and never neglect the basics that make a home worthy of your money just because of the lower purchase price.