Buying Real Estate Foreclosures
Before you begin looking for a foreclosed home to purchase, decide if this is going to be an investment opportunity or if you are looking for a home to live in. Then check out our post on the types of foreclosure properties to better understand the last phases a foreclosure goes through. To help you decide which type of foreclosure property you’d like to focus on, here are a few tips on buying foreclosure properties.
Buying a Pre-Foreclosure Property
Homeowners who have received a Notice of Default are often eager to sell their properties to avoid foreclosure. To purchase a pre-foreclosure property, you will work with the homeowner directly. You will need to build trust with the homeowner and establish your need for accurate information so you can make a reasonable offer. Gather all the necessary information about the home, including all the physical and financial information you will need to develop a reasonable offer to present to the homeowner. If you plan to purchase the home for resale, you’ll also want all the information necessary to determine if you can resell the home for a profit.
Physical information includes the condition of the home and its major systems (roof, heating/air conditioning, appliances, foundation, plumbing, etc.). It’s crucial that you fully understand the conditions to plan for future upgrades/repairs. Paying for a home inspection may be worth the extra expense to avoid unknowingly buying a house needing extensive repairs.
Financial information includes finding out the number of liens, loan balances, and looking over any correspondence from lenders to ensure no areas have been overlooked.
Once you have all the needed information and have determined this will be a good deal for you, the next step is to prepare a written contract and present it to the owners. When both parties agree to the terms, you will need to contact the foreclosure attorney to stop the foreclosure process within the designated time frame so you can close on the home.
Buying a Short Sale
When you are looking to purchase a short sale or quick sale, you will negotiate directly with the seller. Be prepared to work with the seller (and their lender). Remember, you are trying to help them out by keeping their home from being foreclosed on and they are giving you a great deal on their home. Be sensitive to their situation, but keep your end goal in mind as well. Check out our page on negotiating short sales to better understand the process.
The most important thing you can do when looking to buy a short sale is RESEARCH, RESEARCH, RESEARCH! It is crucial that you understand the full extent of liens on the home, the problems with the home, and any other pertinent factors that will contribute to this purchase being a wonderful success or a horrific nightmare.
You will also want to get an agent that is experienced in short sales. The terms of this sale not only have to be approved by the seller, but also their lender, as they will have to agree to accepting less than full payment on the mortgage balance. Your seller may accept your proposal, but the lending agency may turn it down. By having an agent that understands the process, you will save time and energy and hopefully find a great deal on a wonderful home.
Buying from a Trustee’s Sale
When you are buying from a trustee’s sale, you are purchasing a home that is in the foreclosure process and up for auction. Again you will have to complete your RESEARCH ahead of time to find out as much information as possible. This is especially true in this case as you will be purchasing the home “as is”. You will need to have cash ready to pay for the purchase at the time of the auction. Trustee’s Sales can be a wonderful investment if you have the cash available and the right property comes along at the right time.
Buying a HUD Home
The Department of Housing and Urban Development (”HUD”) is a government agency that has their own procedures for foreclosures and selling them. HUD homes are sold as-is, but the price is usually lowered to make up for the cost of repairs that will need to be made. HUD offers a comprehensive list of what you need to know. It is highly recommend you take a look at it before hunting for your new home.
Pages: 1 2
Did you enjoy this article? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment