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the zac team's Blog

By Zac Pasmanick at The Zac Team | Agent in Morningside-Lenox Park...

Foreclosure 101

Greetings neighbors,

Thinking about 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?

Pre-foreclosure:

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.

Sheriff's Option:

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 these reasons.

Repossession:

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.

Understanding Repair Cost

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.

Not Knowing 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

Because these 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.

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