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The ABCs of Buying a Foreclosed Home
Today, there are many fabulous homes available to buyers who are willing to buy a foreclosed house. By some estimates, nearly 3% of all of the homes in the United States are vacant or foreclosed.
Buying a foreclosed house can be a real bargain and a great investment if you know how to proceed properly.
The best way to find a wide range of foreclosed homes is to contact a real estate company that specializes in these types of properties. Most lenders who hold foreclosed homes hire realtors specializing in these types of properties to represent them. Some of these kinds of agents even conduct tours of foreclosed homes, a great way to see a number of them in a short while.
It is not recommended to buy a foreclosed home at auction, where you usually don't have a chance to look at the home first. When you work with a realtor, it is no different than any other kind of purchase, you can walk through the home to see if you like it and how much work it needs.
There may be mild damage, due to the home not being cared for while it was empty, or there may be serious damage that the homeowners spitefully caused. If there is real damage to the home, you may consider asking a general contractor to look over the home and give you an estimate on how much it will be to repair the damage.
You should figure the value of the home in comparison to the rest of the homes in the areas, known as comparables. Comparables are the listing of recent sales of homes in the immediate neighborhood. Make sure you look at the prices of homes that sold, since listing prices can be inflated. At this point, you would have to ignore any damage, since you need to estimate what it would be worth once you have bought and renovated it. Next, deduct the cost of renovations from the comparable price.
Start your bidding as low as is feasible. Remember, if you wanted to pay full price, you would have bought a non-foreclosed house. The specialty real estate agent should be ablt to help you with the price range of the seller. In today's market, this is likely the optimum buyer's situation, a seller who does not want to own the house under any conditions, is losing money on it, and has even more houses to get rid of.
Based on the comparables and the calculated repair costs, set a maximum bid in your head that you are willing to offer, and don't be tempted to go higher. Since you are working with a foreclosure, you have to expect to get a bargain.
Be ready to borrow enough to pay for the house and the required repairs. If you are able to bring a lot of cash to the table, make sure you keep some cash for the repairs instead of making too high a down payment.
You might want to look into a 203K loan, which is a bank loan, guaranteed by HUD, that allows for both the purchase and repairs of the property in one loan.
Try to get a pre approved mortgage before you begin to look for the foreclosed homes. For the maximum negotiating power, you have an advantage over other prospective buyers if you already have your financing in place.
{Don't settle for the first house you see or give up too easily if you don't have success at first.|Just keep in mind that there are lots of foreclosures today, so there is no need to pay too much or to settle.|Whatever happens, don't be ready to settle, since there is a lo
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