investing in a foreclosure? Well here are a few tips you will need to
know to purchase a foreclosed home.
First off, decide on what stage of foreclosure you
want to purchase in, such as: pre-foreclosure,
sheriff's option, or repossession which is also called REO (real estate
owned by the bank) which is the best stage to purchase a foreclosure
according to many real estate professionals.
Not familiar with
the different stages?
Homeowners with homes in this stage usually owe
more money than what the home is actually worth. Due to the home being
"underwater" potential buyers will have to negotiate with both the
lender and the owner. This act can produce a slow and difficult process.
One good aspect of this stage is the fact that potential buyers
actually have the opportunity to inspect the home before purchasing
which is not the case in other types of foreclosure sales.
Sales in this stage are normally consumed with
difficulties however these sales usually contain the lowest prices. In
addition, these homes are usually unavailable for inspection therefore
those consumers who decide to purchase in these stage can be left with
hefty expenses for repairs. This stage is not necessarily the best for
consumers and should actually be left to the professionals because of
Homes usually make
it to this stage when they fail to sell in a sheriff's option and the
bank gains possession. This stage is not always the best for bargains
but homeowners have a good chance to perform inspections before closing,
cutting down the chances of surprise repair cost.
Once you've decided on what stage to purchase,
make sure to avoid these common mistakes often made by those purchasing a
foreclosure such as:
Getting Caught Up in a Bidding Frenzy
Because banks have a tendency to under-price
repossessions to attract more bids and to sell more quickly consumers
may become too anxious and pay too much.
Make sure you take full advantage of home
inspections. In addition, make sure you have someone with you who can
give you a fairly good estimate of repair costs.
What Comparable Properties Cost
Make sure to do your research on houses in the
area and keep your bid around that price or lower.
Purchasing In a
Neighborhood that Contains High Foreclosures
neighborhoods contain high foreclosures, the prices of the homes will
probably continue to decrease. Therefore, if you're looking for a short
term commitment, purchasing in this type of neighborhood could lead to
selling at a loss. It would actually be better to purchase a foreclosure
in a more stable community.
Not Having Financing In Place
Make sure you have already been pre-approved because banks are
interested in consumers who have financing already in place. Banks are
more likely to move on the highest bid with the best financing.