Buying a foreclosed or real-estate owned (REO) home could be a great opportunity for investors, first-timers, and traditional homeowners who simply can’t resist a good deal.
A foreclosure is a bank-owned property acquired from a homeowner who defaulted on their loan. Once in the possession of the bank, the property is handed over to an asset manager who is tasked with selling the home at or above market value. An inspection is almost always necessary, as foreclosures are sold as is, and working with a real estate agent is completely invaluable.
While there is often little room for negotiation when it comes to purchasing a foreclosed home, there are still a lot of steps that cannot be missed. It’s important to get as much information about the home, the process, and similar properties as you can, to ensure you get a fair price and make a smart decision.
Foreclosure vs. Short Sale
Short sales are properties that are in pre-foreclosure. This means the owners of the property are no longer able to make their payments and, understanding that they will take a loss, have decided to list the home for sale instead.
Unlike a foreclosure, short sales can sometimes take over a year to close due to seller obligations and lender requirements. And successful offers require approval from the lender, which isn’t always easy to get. As a result, many short sales end up in foreclosure.
3 Helpful Tips For Purchasing A Foreclosure
Patience is key
Banks and asset managers have their hands full with thousands of foreclosed properties at various stages in the process. As your case is one of many, it is absolutely necessary that you be as patient and as understanding as possible. Keep in mind that there are several steps, forms and approvals needed to close on a foreclosed home—and it really is a huge game of numbers. Once the numbers make sense for the lender, and all the paperwork is adequately accounted for, you can rest assured that you’ll get the keys to your new home soon.
Get a Buyer’s Agent
Having a buyer’s agent throughout the foreclosure process is an excellent way to save time, stay on track, and keep informed. The buyer’s agent is already familiar with REOs, and they don’t mind the legwork associated with finding out the sales history of the property, looking up comparable homes both sold and pending, and ultimately, writing the clean offer necessary to move ahead. Let them be the liaison between you and the asset manager.
The bank is very specific about what they’ll need from prospective buyers, and they won’t compromise on a single step. Be sure your offer package is complete and that your pre-approval letter makes a clear case for your ability to own and maintain the property. If certain forms or paperwork are asked of you, use what you’re provided. This diligence will soon pay off, as you’re able to swiftly move along on your path to homeownership.
Is this a good idea?
Purchasing a foreclosure can often mean significant savings when compared to the more conventional route. But due to the bank’s strict and bureaucratic process, this option can also be a challenging one as well.
Still, buying a less expensive property might prove incredibly budget and lifestyle friendly. There are even special programs available to buyers that make financing a foreclosed home much more possible and attractive.
Sure, it may not be your typical home buying experience. But, with enough patience and dedication, settling into your new home can be all worth it in the end.
Ready to find a home for sale? Contact us today to get more information about buying or selling foreclosures.