investment property financing/buying a foreclosed home

7 Mistakes Buyers Make When Buying a Foreclosed Home

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You’re ready to buy your dream home and want to get the most for your money. You’ve been hearing there might be some great deals on the market, especially if it’s a house in foreclosure. Maybe you could get a bigger house or more land if you buy one that’s foreclosed.

You’ve heard that you can save between 5% to 20% off market value. When you are buying a house, that’s a big chunk of savings. 

While the rate of foreclosures has generally slowed down, they are still out there and offer some advantages. Consider these 7 things if you are thinking about buying a foreclosed home. 

1. Consider Repairs and Costs

Often a house in foreclosure is there because its previous owner had a financial hardship. It might also be a house that sat empty for a period of time. It could be dirty, neglected or even been the victim of vandalism. 

Don’t get caught up in the excitement of how much money you are saving. It is necessary to consider how much you also need to spend. If the house needs repairs, there is a cost associated. The house may need extra work and money.  

With a foreclosure, it is important to consider the actual dollar amount for repairs and labor. Additionally, once you invest that money back into the house will you have spent more than the house is actually worth? 

Avoid buying what you perceive as a deal. Then spend so much on repairs, you have outspent the true value of the house. 

2. Failure to Get an Inspection

While you might be looking to save money with buying a foreclosure, skipping on an inspector is a terrible way to save it. 

Inspectors are trained professionals who can figure things out about a house that you can’t see on the surface. Depending on where you live, a certified inspector charges between $300-$500. This is money well spent. 

The inspector can identify potential issues before you make the big purchase. Is there mold, a problem with the plumbing, the furnace? These are all expensive issues you would want to know about before buying a foreclosed house. 

3. Going It Alone Instead of Using the Professionals

Buying a foreclosed home is just not the same as buying a non-foreclosed house. Trying to do it without the advice and guidance of real estate and legal professionals is a big mistake.

Buying this kind of home is fraught with potential problems and intricacies. You need a professional to guide you through the process. Find a real estate professional who understands the process of purchasing a foreclosure. Legal advice is also necessary to make sure the laws and regulations connected to foreclosure are being followed in your favor. 

Purchasing a home, not in foreclosure, can go pretty quickly. You can get to closing often in 6 to 12 weeks. Buying a foreclosed home often takes much longer. Using a professional as part of the process can help prevent unnecessary snags that might lengthen out the process. 

4. Clean Foreclosure

You want to be certain you are buying a house that is a clean foreclosure. What does that mean? Clean floors? Clean showers? Not exactly. 

A clean foreclosure is one that also does not have liens, tax debt, or utility bills that come with the house. If you purchase a foreclosure that is not clean, you could be incurring those liens and bills with the house. This could add unexpected costs to the purchase. 

5. Buying More Than You Can Afford

Many an investor has had things go wrong when they buy more house than they can afford. This is particularly tricky with foreclosures. 

If the foreclosure needs repairs, more money is needed. The value of the house may change increasing the tax burden connected the home. 

It is easy to think you want to buy a bigger house because you can get it cheaper. No more than 20% to 25% of your take-home salary should go to your mortgage costs. 

Be wary of thinking you can buy a more expensive house just because you can get it cheaper at the time of sale.

6. Not Doing Your Homework

 Buying a foreclosure comes with some homework. These houses come with some baggage. This could come in a variety of different forms:

  • liens, tax bills, utility bills
  • neglect
  • abuse from the previous owner

If the house is bank-owned, it will not come with a disclosure statement.  If the previous owner is not directly involved in the sale, you will not get information about the house from them. 

Research and use inspectors and real estate professionals to learn as much as you can about a foreclosed house. Prevent it from creating surprises for you later. 

7. Short Term Vs. Long Term

Buying a foreclosed home can be a great investment, but you need to be prepared. Many investors go into it thinking they will do some quick fixes and flip it to make some quick money. 

It doesn’t always work that way with foreclosures. Often they go down in value before they come back up. Thinking you can flip a house short term could backfire. 

You need to factor in the money you have invested in the property to get it resale worthy.  Then you need the market to support the higher price. 

Professionals believe you should plan to stay in a foreclosure purchase for up to ten years before it becomes worth the investment. Consider whether you want to buy a foreclosure hoping to make a quick buck. If so, this is likely not the route for you. 

Invest in a foreclosure knowing the long term is where you will make money on the property. 

Buying a Foreclosed Home Successfully

You can get a great deal on a foreclosed home, there is no doubt about it. You could buy a foreclosure and transform it into the home of your dreams. But you need to be smart about it. 

Buying a foreclosed home requires you to do your homework about the property. Use professionals to help you through the process. A healthy dose of realism is smart too. 

Learn the ins and outs of purchasing a foreclosure by checking out the resources on our blog. We want you to find the home of your dreams and it could be one that had a foreclosure in its history. 

buying a foreclosed home at auction

5 Tips for Buying a Foreclosed Home at an Auction

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As the foreclosure crisis has affected hundreds of thousands of homeowners around the country, there are also some homeowners who got their first home from one. I

f you’re a first home homebuyer or looking to build wealth through real estate, buying a foreclosed home at an auction is a smart move.

Here are five tips for finding the perfect home when looking for a foreclosed home at an auction.

1. Finding the Right Auction

If you want to succeed at auctioning, you need to find the right one. There are online and print resources that offer information all about where to find auctions and which offer the best deals.

Foreclosure auctions happen all the time and offer some great deals. Try Auctioin.com or RealtyTrac if you want to find auctions in your area. If you’re looking to buy right away, you can find an auction happening in your region soon.

Forecloser sales are usually compiled within each county. Either online or at the county offices, you’ll find data telling you all about the local market. Third-party sales agents or “trustees” even track foreclosure data and may be happy to share that data should you choose to work with them.

Ask local real estate agents to help you find good properties that are up for auction. By law, there’s no agent commission on foreclosure sales, but you may end up finding that the price is inflated to cover fees that the sellers incur.

Ask around for who is handling foreclosure auctions and you’re sure to find a few people who know where to look.

2. Do Research On Properties

It’s vital for you to do lots of research whenever you’re considering a property at an auction. Either the properties or the auction itself should offer due diligence documents and transaction details. These give you an insight into what’s happening with the properties up for auction and what to expect during the course of the auction.

Real estate attorneys know what to look for when seeking information on properties. Get some independent advice by hiring a knowledgeable real estate agent or attorney to advise you on properties.

Before you commit to an auction, you need to know the estimated resale value of a property. Submitting a bid on a property that’s higher than the resale value puts you at a financial disadvantage.

Without proper research, you’ll put yourself into a position to get hit with property liens. There’s a high probability that properties that are foreclosed upon have been borrowed against. This borrowing, based on the value of the home, is up for repayment when a house is sold.

It’s now your responsibility if the borrower doesn’t settle before the home is sold.

3. Take a Look At The Property

If you have time, drive by the property and take a look at what the condition is. When you know what the condition is from the outside, you’ll be able to guess what it looks like on the inside.

Homes under foreclosure aren’t necessarily ready to be moved into. If the home is occupied, it’s the renter or the financial institution who is foreclosing on the person inside. Disturbing the occupant is illegal, rude, and considered trespassing if someone lives at the property now.

Foreclosed properties receive bids under an “as-is” condition. The condition of the interior of the home is typically unknowable until it’s yours. Once you own the property, expect the worst and allow yourself to be surprised.

Put aside several thousand dollars to handle the repairs to make it liveable. In order to bid comfortably, leave yourself a few thousand dollars to get the ball rolling. The looks of things on the outside are a fair indicator of what’s inside, but not the full story.

A poorly kept exterior typically indicates an unfortunate interior. However, lots of people keep up a home on appearances while letting things fall apart inside. This is especially in the favor of sellers looking to get a good price.

4. Secure Your Financing

Before you start dreaming about ideal home situations, doublecheck your funding.

If you have bad credit but lots of cash on hand, you’re in the perfect situation. Most foreclosure auctions will take cash, cashier’s check, or a money order endorsed by a bank. Since auctions need to be paid in full as soon as you win the property, you’ll need to have payment ready at a moment’s notice.

Some states allow you to pay a percentage while requiring the rest within a set period of time. Don’t expect this to be the case, however. Have your money ready ASAP.

If you’re buying from a county foreclosure, you may even have to put money down in advance. Depending on where you’re located, 5% or 10% on the day-of must be put down. This ensures that only serious and competitive bids end up in the final tally.

5. Confirm the Details

Even if the auction is happening today, call in to see that all the details of the auction are the same as when you first read about it. Some foreclosure auctions get canceled or postponed on the day of.

If the person who owns the house comes up with the money, they can push back a foreclosure. Some buyers get a loan modification or sell the property as a short sale. Every buyer has a different situation and everyone home has a different story, some of them with a twist right before the end.

Buying a Foreclosed Home at an Auction is Smart

No matter what your financial situation, buying a home in foreclosure is a way to start building wealth. Buying a foreclosed home at an auction offers you the opportunity to get your first house or start revitalizing a community.

If you’re looking for a way to turn a foreclosed home into something that turns a profit, check out our guide for more info.

The Most Common Issues to Look out for When Buying Foreclosed Homes

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One in every 2,402 homes in the United States gets foreclosed.

Delaware has the highest rate, with one in every 831 homes facing foreclosure.

Buying foreclosed homes can seem like a great deal or investment. Often times, individuals who buy foreclosed homes “flip” them. In most cases, this means they buy them, rehab them, then sell them for market value.

While it seems amazing to buy a house for dirt cheap, everything comes with a price. With a foreclosed home, the price isn’t necessarily monetary, but you may pay in other ways.

Read on to find out about some of the issues to look out for when purchasing a foreclosed home.

Buying Foreclosed Homes: Previous Owner Destruction

In most cases, the previous owner of the home was kicked out of their house. This is typically due to non-payment of their mortgage over a period of months.

Obviously, this is an incredibly grim situation and a low point in their lives. They may have even lost their home due to circumstances beyond their control such as medical problems that rendered them unable to earn enough money to pay the mortgage.

Sometimes, this means that they take out their rage on the home itself. They may destroy part of the property with a sledgehammer, rip out sinks and fixtures, or even vandalize the property. They may also take appliances like refrigerators from the house.

There is little you can do about this, except repair the damage that they did.

Neglect

Some homes are foreclosed on because the owner neglected the property. This can happen often for individuals who have second homes but can’t keep up their payments on their secondary residence. As a result, their home gets foreclosed.

If the owner knew they could not pay for their second property, they may have stopped visiting it altogether and let it fall into disarray.

There could be issues with molding, trash in the home, the pool having insects or vermin in it, rotting wood, problems with the roof, etc.

Neglect can also occur when the previous owner lived in the property. Some people are not capable of cleaning and keeping up their home, especially if they suffer from physical or mental disabilities. By the time the home gets foreclosed on, there could be huge structural issues with the house.

You may even have the unpleasant issue of purchasing a foreclosed home in which a former owner was an animal hoarder. Animal urine and feces can also cause the wood inside the home to warp and rot, and you may have to redo the floors completely.

There Is No Disclosure

You’ve probably seen television shows in which the characters purchase a house and the real estate agent must tell you that five people have died in it.

There is no such disclosure when the bank owns the home.

Disclosure doesn’t have to be about nefarious goings-on in the house. It can mean disclosing to the new residents that there is asbestos in the attic or that the floor is rotted in the kitchen.

Since the bank hasn’t lived in the property, like the former residents, they will have no idea about any of this information.

In some cases, you can obtain records to see if there is anything about the house you should know about. But mostly, you’ll be in the dark.

That is, of course, unless the house you’re purchasing is already famous either nationally or by local legend.

Cleanliness

When you move into a new home, it is usually clean and ready for you to move in. Even if the property hasn’t been vandalized or neglected by previous owners, there is no guarantee the home is going to be clean.

Even if the previous owners were not neglectful of their property, they still might not have been particularly clean people.

You’ll have to make sure you do a thorough cleaning of the house before moving in or starting to flip it.

Vandalism

If the home sat by itself with no occupants for a long while, it could have been susceptible to vandalism. This doesn’t always mean that the vandalism needed to have come from former owners, either.

Local teenagers might have known the house was empty and went there to party.

People may have realized it was abandoned and went into the house to practice their graffiti and artwork skills on the walls. Or, they may have helped themselves to fixtures and appliances inside of the home.

They may have also vandalized the outside of the home, with spray paint, glue or anything else they may have felt like doing at the time.

Unfortunately, because you’re the new owner, it will be your responsibility to repair all of this once the house is yours. This can be a costly project, and often times, banks don’t give credit to people attempting to remodel a foreclosed home.

Is Buying a Foreclosed Home Worth It?

Buying foreclosed homes can be worth it or more trouble than they’re worth, depending on what your purpose is. If you’re looking for a huge project to complete with your family or hired contractors, it might be one of the best things you ever do.

If you’re a huge fan of remodeling homes then selling them, they also might present a fun challenge for you and those who are in business with you.

For more information on all things related to short sales and buying foreclosed homes, visit our blog.

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How to Fix up Foreclosure Homes and Turn a Profit

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Are you considering buying a foreclosed home?

Foreclosure homes often require extensive tender love and care. After all, if the owners were unable to continue their mortgage payments, it’s unlikely they were keeping the home in good repair.

According to national statistics, one in every 1,835 homes results in foreclosure.

While a foreclosure may be every owner’s worst nightmare, they can present a unique opportunity for buyers. Although these properties often require substantial work, they can prove to be extremely profitable for buyers.

In this post, we’ll reveal six must-know strategies for maximizing your profits on a foreclosed home. With these tricks of the trade, you can be well on your way to buying your first foreclosure home.

1. Enlist Professional Help

First things first–it’s essential to enlist the help of professionals. This is especially the case if this is your first time purchasing a foreclosure.

Hiring accredited professionals not only ensures a quality-grade job is accomplished but also helps to avoid any legal stipulations.

Be sure to utilize a real estate professional who has specific experience in purchasing foreclosures. These professionals will be aware of which neighborhoods are best to invest in and which properties are beyond-renovation.

Next, you’re going to want to hire accredited electricians, plumbers, and contractors. While hiring a professional may prove to be expensive, it’s always worth it in the end.

2. Location, Location, Location

We hear it all the time–location is key when it comes to the perfect property! The same rule applies to foreclosures.

Be sure to research the area properly before committing to a purchase. This will be a significant consideration down the line for buyers.

An important factor to note is whether or not the home is close to a public/private school. This can be a “make it” or “break it” condition for a serious buyer with a family. You also want to consider how many shops, restaurants, and grocery stores are nearby and how accessible they are.

Public transportation is also significant when it comes to a property–especially if the home is outside the inner city. Make sure transit is easily accessible, otherwise your home may not be as valuable.

Taking note of these important aspects can really affect the sale of your home down the road.

3. Focus on the Most Important Rooms

One of the most challenging aspects of renovating a home is deciding where to spend your money.

That being said, it’s crucial to decipher which renovated rooms result in the utmost profit. According to Architecture Lab, the most important rooms to focus on in a renovation are the kitchen and the bathroom(s).

When choosing your finishes, be sure to select a style that has broad appeal. Have a real estate or design professional provide you with advice as to what styles are currently trending.

This is where the bulk of your money will be spent, so it’s crucial to invest it wisely.

4. Upgrade the Interior Systems

While it may be tempting to focus on the elements of the home that are only visible to buyers, it’s equally important to focus on the interior systems.

Remember, buyers expect the home’s mechanical and electrical systems to be in good working order. Generally speaking, these are not items buyers are willing to upgrade after purchasing a turkey home.

As a general rule, be sure to focus on:

  • Heating and air conditioning
  • Water heating
  • Plumbing
  • Wiring

When it comes to upgrading these systems, save yourself a headache and enlist the help of a licensed professional. Consider that some states have legal rules and regulations stating that a professional must be used for these services.

While these upgrades may prove to be expensive up front, they’re vital to maximizing the eventual profit of the home.

5. Paint and Flooring

First impressions are everything. That’s why when you open the front door to your home, you want to feel instantly welcomed.

There are two very important factors that will aid in this: paint and flooring.

Paint can be one of the most cost-effective ways to improve not only the interior of a home but also the exterior. A fresh coat of paint can instantly brighten up your home and do wonders for the eye.

A bright, light color for the interior can immediately change the mood and feel of your home. It will update it drastically without a tremendous amount of effort or cost.

This same rule applies to the exterior. Curb appeal is everything, so make sure to freshen up the house, shutters, and deck with a complementary color.

Second is flooring. Whether it’s updating the current with a quick stain or replacing it altogether, your flooring creates a flow that should complement the other elements of your home.

Special designs or tiling can help draw the eye to key areas, such as the kitchen or entryway. This helps to add that special uniqueness for a potential buyer down the road.

6. Don’t Overinvest

While it may be enticing to pour your heart, soul, and wallet into your first foreclosure renovation, it’s crucial to limit yourself.

Yes, it may be tempting to renovate every nook and cranny of the home. But it’s important to resist this temptation for the sake of time and money.

That being said, have your real estate professional keep you updated with the property values of your neighborhood. Always ensure that you are not renovating the property above the value of neighboring properties.

While it may be nice to have the most beautiful home on the street, this often has an adverse effect on your future property value.

The Perks of Purchasing Foreclosure Homes

If you’re contemplating the pros and cons of purchasing a foreclosure, it’s vital to understand how to best profit from such a purchase. While purchasing foreclosure homes may require extensive time and money, the profit can be exceptional.

But, it’s also safe to say that not all foreclosed home are created equal. From choosing the right foreclosure in the right neighborhood to selecting which rooms to focus your restoration on, there certainly is a right way to renovate.

Looking for more tips on purchasing a foreclosure? Visit our website for our expert tips and tricks of the trade.

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What is Forclosure: The Ultimate Buyers Guide

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Are you looking to buy your next home at the best price possible?

You may want to consider purchasing a foreclosed property.

Often, you can buy a foreclosure at a price that’s well below its’ actual value.

According to Home Buying Institute, studies show that buyers of foreclosed properties save an average of 27%. A 27% discount on a $300,000 home equals savings of over $80,000.

Unfortunately, many people miss out on the opportunity to buy this reduced-rate real estate because they are not familiar with how foreclosure works.

If you might be wondering “What is foreclosure?”, then you are in the right place.

Want to know “How does buying a foreclosure work?”

We’ve got the answers you need.

Read on to find out what you should know if you are considering investing in foreclosed real estate!

What is Foreclosure?

Foreclosure is what happens when the buyer (or buyers) cannot or will not pay the required mortgage payment on their real estate loan.

Often, the term homeowner is used when discussing the foreclosure definition. However, the person or people who are living in the home are not actually the homeowners because they still owe on the balance of the house.

Usually, buyers will take out a loan from a bank or other lending institution to purchase a property. Then, they will have to adhere to the terms of the mortgage loan until the house is paid for in full. While payments are being made on the property, they do not own the property outright.

Should the buyers fail to make the arranged payments, the property enters foreclosure. At this point, the house may go to an auction. At an auction, buyers will bid on the property, and the winner pays the amount offered on the spot.

If the house doesn’t sell at an auction, then the lending institution will assume ownership. This may cost the lender several thousand dollars.

The foreclosed home then is sold by the lending institution. They will attempt to sell the house at a price that will cover whatever it has cost them, but the price is usually much less than if you purchased the home off the market in the traditional way.

Why Do Foreclosures Occur?

According to statistics published by Realtor.com, one in 13,000 homes will end up in foreclosure.

There is a wide range of reasons why a house ends up in foreclosure. These include:

  • The owner lost their job and cannot afford the mortgage payment
  • The property owners abandoned the house, and they are no longer paying their loan payments
  • The owner encountered a variety of unforeseen financial hardships, such as caring for a sick family member and can no longer afford to make payments
  • When the homebuyers purchased the property, their payments were out of their realistic price range, so they are unable to keep their mortgage payments up to date
  • Someone in the family got transferred to a new area (for their job or other reasons), and the dwellers could not afford to make two house payments

Whatever the reason, when a foreclosure occurs, the mortgage payments have gone into default.

Often, when this happens, the lender will attempt to work out a solution with the homeowners prior to entering into foreclosure proceedings. If they are unable to reach a reasonable solution to avoid foreclosure, then the lending institution will move forward with foreclosing on the property.

Smart Tips for Buying Foreclosed Real Estate

Buying a foreclosed home for a great deal is possible. But, it’s not guaranteed. If you are interested in purchasing a foreclosure, there are a few things that will help ensure you’re making a wise purchase.

Don’t Expect Price Negotiations

Unlike other houses on the market, the price of a foreclosed home typically leaves little room for negotiation.

Since you are most likely buying the property from the lender, you can expect an impersonal experience. And, the price that is offered is often the price that is required so that the lender does not go into further debt themselves.

Foreclosed Properties Are Typically Sold As-Is

Although you might be scoring a great deal on the price of a foreclosed home compared with similar properties, foreclosed homes may not be in “move-in ready” condition. Often, the owners have not maintained the property’s upkeep.

You might have to deal with repairs and improvements that you would not find if you were buying another house on the market.

Find Out the Owner’s Specific Requirements for Closing

When you purchase a foreclosure, you are entering a non-standard agreement. This means that the owner may have unique, specific requirements and procedures for closing the deal.

Prior to entering into an agreement, you should find out what the owner’s requirements are for closing and be sure that their requirements are acceptable to you.

Consider Potential Baggage

Foreclosed homes may come with unforeseen baggage, such as liens against the property or extensive repairs. Avoid making the common mistake of overlooking circumstances that may influence your purchasing decision.

If you choose to go through with purchasing a foreclosure, make sure that you have carefully weighed the pros and cons and that you are comfortable with the big picture. If you intend to buy, don’t commit until you are sure that you can live with whatever unusual terms apply to the sale of the property.

Contact Professionals Who Are Familiar With the Foreclosure Process

For buyers seriously considering purchasing a foreclosed home, it’s wise to consult the pros. Short-sale and foreclosure experts can answer all of your questions, including “What is foreclosure?”, and any other questions that you may have.

Before you buy, ask for advice from the experts.

Think you may be interested in purchasing a foreclosed home?

Check out our blog to find out more about buying a foreclosure!

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5 Massive Mistakes Investors Make When Buying a Foreclosed Home

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While having a second home is a dream for millions of Americans, millions more invest in homes as a way to build extra wealth or earn extra income. Some of the cheapest houses on the market are the foreclosed homes that people were no longer able to pay for. When you’re thinking of buying a foreclosed home, you have a lot of little issues to consider.

Here are 5 of the most common things to consider before you buy a foreclosed home.

1. Foreclosed is One of Many Options

Buying a foreclosed home isn’t the only option that you have when you’re searching for a home to buy. When you’re looking for an investment, there are lots of homes that are available and in great shape that are the same price as a foreclosure.

Foreclosures are popular and attractive to many homeowners because they are often some of the lowest priced homes on the market. However, when you buy a foreclosure, you could inherit a lot of the problems the property has.

You could be dealing with the liens against the property, which will lead to higher costs in the end. You could also be dealing with a house that’s in serious disrepair. There’s no need to spend your first year owning the house just doing construction work.

You won’t be making any money.

Take a look at what foreclosures are available, but don’t let your search stop there. You could be missing out on some fantastic properties if you don’t look beyond foreclosures and see which could be the best house for your budget.

2. Check For Trends

When you’re looking to invest in a house, you need to pay attention to which neighborhoods are on the move. While some neighborhoods might be out of your price range, if another one is seeing a huge spike in growth, take a look at preexisting houses.

For a quick turn around, look for hot artist neighborhoods or up and coming tech hubs. Lots of tech companies and art collectives appreciate the potential of large raw spaces like warehouses and lofts. With their creative perspective, they can turn a load of abandoned buildings into a movement in a region.

Pay attention to industries that are starting to buzz in your region. Make an investment where they are or where they’re headed. You might find some great deals in a forgotten part of town that’s ripe for reinventing.

Real estate agents, small business owners, and even the chamber of commerce will be able to tell you where things are headed in the coming years.

3. Don’t Go Out There On Your Own

While you might think it’s cheaper to pound the pavement and follow up on Craigslist leads on your own, you don’t know everything. Lots of real estate agents know the complexity of an area or what’s going on with the foreclosure market.

Having someone who knows about buying and selling properties to be on your side is a huge plus. They know which properties yield the highest returns and generate the most attention.

While a real estate agent can help you to find properties that are sure winners in the market, they don’t know everything about the law. You’ll need to find someone who knows about real estate law to navigate foreclosures or the legal entanglements they can carry. While your real estate might be able to give some general advice, don’t rely on them for anything legal.

4. Know The Score

Beyond just knowing which neighborhoods are hot, you’ll need to do some additional research into what’s happening in that neighborhood. Knowing why a neighborhood is hot can help you to make a well-educated decision on whether or not to invest.

When a neighborhood has a lot of availability, that means the prices will be lower. While lower prices mean a lower bar for entry, it also could mean that the neighborhood will take some time to start climbing to become a high-profit center.

Keep an eye on what the sales numbers are as well as the prices of homes in the region. If there has been a steady increase in sales, you know that things are on the incline. If sales have dropped or remained stagnant, there isn’t a lot of growing that’s going to happen.

Hire a qualified agent and a lender to help you determine where to invest. While you’ll need to do a little work to become familiar with the process of foreclosure and all its lingo, it will reward you in the long run. You’ll have better bargaining power when you know what to look for and which pitfalls you could be avoiding.

5. Inspections Are A Must

While your home might look great and the owner might be pricing it to move, don’t move so fast. The next step will be to make sure that you hire someone to do an inspection on the home. If you fail to do a proper inspection, you could be stuck with a death trap or at least a place with a mold issue.

While your inspection can alert you of problems, it could also lower the cost of your new home. When you point out what’s wrong, the owner might knock a few dollars off the price.

Make sure you know what problems to anticipate and which you won’t have to deal with before you buy.

Buying a Foreclosed Home is an Investment

When you’re buying a foreclosed home, you’re paying a downpayment on an investment that you want to see a return on. In order to see a return, you need to have a solid grip on how the market works. Your best bet is to get to know all of your options before you commit.

If you’re interested in what a short sale listing agent does, check out our guide to understane more of how the market works.

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8 Tips for Buying a Foreclosed Home

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Are you considering buying a foreclosed home?

Buying a foreclosure can be a great way to score a bargain while househunting.

What exactly is a foreclosed home, you ask?

These are homes in which the owners default on their mortgage payments and were unsuccessful in selling their home. As a result, the lender(s) assume ownership of the home and try to sell it to recoup costs.

While foreclosures are not exactly common, they do still happen. Studies reveal that 1 in 13,000 homes results in foreclosure.

Although foreclosures do often present a unique set of challenges to buyers, there are many benefits to purchasing a foreclosed home. If you’re considering opting for a foreclosure, you’re going to want to read these eight tips for buying a foreclosed home.

Find a Realtor Specializing in Foreclosures

Just like any other real estate transaction, you’re going to want to use a realtor to guide you in your search. But, not just any run-of-the-mill realtor is going to be able to represent you in this particular search.

Foreclosures are a whole new animal when it comes to purchasing a home and a realtor is a must.

A realtor familiar with foreclosures will be able to provide you with essential information on the listing such as:

  • How long the property sat vacant
  • Whether it endured freeze and thaw seasons
  • Pitfalls associated with foreclosure homes

These are all essential elements that will help you understand if a particular foreclosure property is a sound investment.

Get a Pre-Approval Letter

It’s important for buyers to understand that although the bank might be selling the home, this is not to assume the bank will also finance the mortgage as part of the deal. These are two entirely separate entities.

Unless you are paying for the home in all cash, buyers are going to need to arrange financing with a lender. This will come in the form of a pre-approval letter from your lender. As with most pre-approval letters, it will document how much money you can borrow from the lender.

Because foreclosure homes are sometimes priced under market-value, they can move quickly. For this reason, buyers are going to want to ensure they have their pre-approval letter prior to beginning their search for a foreclosed home.

If not, the buyer is likely to lose out on the deal to other buyers who already have their financing arranged.

Budget Carefully

A pre-approval letter outlining your maximum budget should not always dictate the amount you are willing to spend. This is especially the case in buying a foreclosed home.

Remember, a foreclosed home is typically purchased in as-is condition. That being said, you’re going to want to ensure you are budging carefully for all of the required work. This could include both damages that appear to the naked eye as well as damages that are not visible to the naked eye.

Some foreclosed homes are in such poor condition they are not liveable for the first few months of the renovations. That being said, be sure to also plan your accommodations accordingly.

Hire a Home Inspector

Hiring a home inspector for a foreclosure is more important than any other real estate purchase. As foreclosures are often sold as-is, the possibility of structural damage is always a risk.

A typical home inspection report will cost $500-$600 and is worth every penny.

The home inspector will be able to give you an overall report on any damages and an estimate as to how much money it will take to make repairs. They will also check the state of the appliances, electrical, plumbing and rooftop.

Most importantly, they will be able to let you know whether or not the home is in a dire state of repair. This is an essential factor as homes in such a state may not be eligible for a conventional mortgage.

Look at “Comps”

Many buyers unfamiliar with foreclosures make the mistake of assuming the property will sell under-asking. This is often due to the belief that the bank is looking to rid of the home quickly or that the “as-is” condition of the home should minimize the asking price.

This, however, is not always the case.

The reality is, sometimes the banks price the home purposefully low in hopes of generating a bidding war. That being said, it’s important to have your realtor closely examine the recently sold properties in the neighborhood. From here, the realtor and the buyers can work together to arrive at a sound asking price.

Get Ready to Move Quickly!

While the negotiation process for foreclosures may require some added patience, the closing process is usually very quick.

What does this mean for the buyers?

This means buyers will more than likely have to close on the property very quickly. The fact of the matter is, most foreclosure properties are vacant and the banks are looking to transfer title to the new owners ASAP.

When drafting an offer for a vacant property, be sure to input a sooner-than-later possession date to stand out against other buyers. An early possession date could be what makes the bank choose your offer as compared to another.

Check the Title of the Property

Conducting a title search for a foreclosed property is essential to protecting the new buyers.

What is a title search?

A title search ensures that the seller has the legal right to sell the property. It also ensures that there are no encumbrances placed upon the property. These are things such as liens, mortgages, unpaid taxes, etc.) that could result in a nightmare for the new buyers.

Let’s consider this situation: The IRS places a lien on the property for the seller’s unpaid taxes. Rather than following the sellers, this debt stays with the property making the new buyers responsible for this debt.

Conducting a title search eliminates this risk as it gives the new buyer’s the legal details of the home.

Practice Patience

Last, but certainly not least, be sure to practice your patience with a foreclosure home. After all, buying a foreclosed home is never exactly a quick nor seamless process.

It’s important going into a foreclosure with the understanding that the process can take longer than a traditional real estate transaction.

Because the buyers are negotiating with the banks as opposed to the original owners, negotiations are bound to take a lot longer.

But, alas, the long wait is almost always worth it!

Are You Looking Into Buying a Foreclosed Home?

While buying a foreclosed home presents a unique set of challenges to buyers, it’s a great opportunity to purchase a home on a budget.

This is especially a great opportunity for first-time homebuyers or investors.

If you are in the market for a foreclosed home, be sure to read our blog and better acquaint yourself with the process.

Happy house hunting!

A Realistic View Of The Challenges Involved In Buying Foreclosed Property

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Investing in real estate foreclosures can be just as difficult and sometimes more challenging than investing in other types of real estate. Often people make assumptions about foreclosures that can make the entire process much more difficult. There are many myths that people have been lead to believe that have caused many problems as you proceed down the path to homeownership. Understanding these myths and the problems they can create can simplify the entire process.

Financing

Since the majority of those looking for real estate are expecting to finance their investment it is important that you each reach a full understanding of the process before they begin. Most buyers believe that they should first find the property of their choice and then find an institution to finance it. However, according to some experts finding the best deals on loans will require you to secure the loan prior to searching for a home. Once you’ve found the property of choice you may not have the luxury of shopping around for the financing afterwards. The risk of losing the property while you search can become very real and you may end up losing out in the end.

Pricing

It is not always a guarantee that the price of a foreclosure is the best price on the market. Just as with any other type of real estate investment it is important that you take the time to compare the prices to other similar properties in the same location. There are times when the prices can be listed considerably lower than those of similar value, there are also times when the price can be considerably higher as well. You will have to view and bid on the property in the same way that you would any other real estate on the market.

Condition

Most foreclosed homes are sold “as is.” In a normal purchase you could reasonably expect to negotiate the price based on the repairs needed or the cost of pulling the property into a livable condition. However, with foreclosed properties this option is usually off the table. As a matter of fact, most foreclosed properties are already listed as low as the bank may be willing to go. While you may have a bit of leeway in negotiating the final price it would be in your best interest to understand that the pricing won’t change that much because of poor housing conditions.

Finally, you’ll want to consider the timing that may be involved with buying a foreclosed home. Because many of these homes are already priced well below current market value you can fully expect that they may not be on the market for a long period of time. Many of them could sell within days or even hours of the time they are listed. Being prepared to move when the opportunity arises will help you to get the right property when you find it.

Understanding that while foreclosures can prove to be an excellent opportunity for those looking to invest in it is also extremely important that you realize the unique challenges that may come with this type of property. It may seem difficult and at times be overwhelming there are many rewards when you choose to invest in a foreclosed piece of property. Keeping a realistic view of the challenges you face before you begin can help to take some of the edge off of the stress that may be involved.

Questions To Ask A Short Sale Listing Agent

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There are many different scenarios of a short sale that a buyer and a seller must be aware of. It is always exciting to get in on a good deal that can save you thousands of dollars so you may be eager to jump in with both feet. However, before making any attempt to put your home on the market you need to have a serious conversation with the leasing agent so that you know if they are qualified to handle the sale of your home.

What is Your Experience?

Ideally, you would expect that any real estate agent would know how to handle any type of sale but that would not be reasonable. Just like you would not expect that any teacher can teach in any classroom in the country. There are many different specialties in real estate and short sales is just one of them. You’ll want to find a short sale realtor that knows the ins and outs of this type of transaction. They will understand how to realistically value your property and what kind of offers the bank will expect. Using a realtor that is not knowledgeable could have you spinning your wheels and getting nowhere.

Can the Complete the Financial Package?

Many financial institutions have their own short sale packages that must be submitted before a short sale can be considered. This information can be very lengthy and detailed and must be submitted along with supporting documentation. Your realtor must fully understand exactly what’s involved in the financial package and be able to put it all together to help you to move the process along. If they are seasoned short sale realtors they will not have any trouble putting these packages together saving you a lot of time and misery.

How Many Offers Will You be Submitting to the Lender?

The answer to this question should be obvious. While you may have a number of offers made on the property your realtor should be focusing on only one. Lender’s have to shuffle through a lot of paperwork and don’t want to be making a decision that the realtor should be making. The realtor should be able to look through all of the different offers on the property and choose the one that is most likely to get the approval of the lending institution and submit that one. Besides, submitting more than one offer to the bank may raise some eyebrows and cause suspicions about the realtor’s ethics and activities and you don’t want to get embroiled in something like that.

There are many advantages to working with a short sale realtor rather than trying to take care of much of this work on your own. Depending on your own personal circumstances a short sale may be your best investment option for the moment but what may be a good deal could turn out to be a total fiasco if you have to work with someone who is poorly qualified to give you the professional guidance that you need.

Valuable Tips On Choosing The Right Realtor

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Choosing to buy a home is for most people one of the biggest decisions they will ever make. Most will spend a major part of their lives planning their dream home and searching for the right fit. Still, one of the biggest mistakes that many of these people will make is that they will fail to take the same painstaking care in finding the right real estate agent.

The truth is that most people base their choice of agents on the input of other people, either a friend or relative. Some even make this important choice based on nothing more than an attractive ad campaign rather than on any knowledge they may have gained about the individual’s background or experience. However, it is important that you realize that buying property can be a long and arduous process that can involve not just property choices but financial choices that will have an impact on your life well into the future and your realtor is the one that will be at your side guiding you every step of the way. It is in your best interest for you to choose this person wisely.

Make Sure They Understand What You Need

It doesn’t matter how much experience or knowledge a realtor has if he doesn’t understand what you really need and expect. The realtor that understands your goals and expectations will be able to navigate the many twists and turns that may come up in your search process. This means that it will be up to you to verify and make sure that you understand what your realtor is offering you.

When you consider just how much money a realtor stands to make on the commission of the sale of any piece of property you’ll understand why every potential realtor is more than willing to give you a song and dance at every turn. Whatever they say you should feel confident that this is a person that you can put your trust in and that they will disclose all the facts and information you will need to make a wise and informative decision.

Get Referrals

One of the best ways to get started in choosing the perfect realtor may be to start with your friends and relatives. They may have had a good experience with a realtor and will provide you with some very high recommendations. However it is important for you to understand that your friend’s goals and objectives may not be the same as yours. This means that you would not want to rely solely on those recommendations to make your choice. You always want to have a face-to -face interview with a potential realtor to see if they can see your vision and if you will be able to communicate well with each other.

Choose the Agency First

Another option that you could try is to choose the agency first. With franchise brokers across the country you should have no trouble finding an agency with a strong reputation behind them. Choosing such an agency gives you a relationship with a well-recognized name behind them. This could get a lot more doors open to you that you may otherwise not be able to get.

Once you’ve chosen a good agency then you can choose from one of their suggested realtors. Choosing your realtor this way could get you just one step ahead of the game. Still, it is important to keep in mind that while a franchise may have a strong national reputation you should also check on the reputation of the specific office that you’ll have to deal with.

Your Realtor Should Specialize in Your Price Range

While a realtor may have a strong track record in finding ideal properties for their clients you want one that specializes in your particular needs and wants. This will require that they are familiar with the challenges that are common to your type of property search. Some agents focus their energy on high-end properties and while they may take you on as a client they may not be willing to give you the attention you expect if your target price range is under their expectations.

However, there are those agents that are accustomed to dealing with other types of properties, fixer-uppers, flipping, and low-end housing units as well. Finding the realtor that focuses on what you’re expecting will help you to make your entire search results a success.

Finding the right realtor can make a major difference in whether or not your search for a new home will be a pleasant one or one that will feel like pulling teeth. A good realtor will be more than willing to go the extra mile to make sure that your search for a new home will end up as successful as it could possibly be.