Nicolejulia, Home Buyer in Lake in the Hills, IL

Advice for a first time home buyer looking to buy a foreclosure?

Asked by Nicolejulia, Lake in the Hills, IL Wed Jan 13, 2010

Was planning on waiting to save up more money to buy a house but a great deal came along. $85k foreclosure house which an old friend, whom I'm not in contact anymore, use to own so I know the house. So, questions... what are the steps? Do I need to get approved from the bank for a loan first? I don't have much for a down payment (shy of $5,000). Does the realtor (which is on the sign) deal with everything? It will need some remodeling so can a foreclosed home be negotiated? Do I need to get another realtor or use the one which is selling the home? How fast do foreclosures go for - Is this house going to go fast or do we have time to think about things? Is there any hidden surprises when buying a foreclosure? I would like to know a little information before talking to this realtor. Any help would be much appreciated.

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Great questions Nicolejulia. As it has been advised, there are a few things you will want to do. Most realtors will want to know that you have been pre-approved to purchase a home before they will show it to you, so that's step 1, get pre-approved. Second, if the home needs repairs, you can look at the 203K FHA mortgage which allows for you to purchase the property and get additional funds for rehabbing all in one loan. Next you want to get a real estate agent who will ultimately represent you. This agent should be able to answer all the rest of your questions regarding average market time for the area the home is located in, how quickly foreclosures in that neighborhood usually go, as well as, negotiating the sale price and how to go about it. If you have any other questions, please feel free to give me a call. We offer Free Pre-Approvals.

Cecelia Marlow
PanAmerican Mortgage, LLC
Senior Mortgage Consultant
0 votes Thank Flag Link Thu Jan 14, 2010
I think the first thing you should do is find a Realtor in your area who has experience as a buyer's agent, especially dealing with foreclosures. An experienced Realtor like this will give you recommendations as to who to contact for your lender and be able to tell you step-by-step as to what to expect. Buyers should always have their own representation (a buyer's agent) but especially when you are dealing with foreclosures and short sales.
0 votes Thank Flag Link Wed Jan 13, 2010
The first thing you will need to do is contact a lender to get Pre-Qualified. When you submit an offer on a Foreclosure, a letter from your lender is also required. The listing agent represents the seller and can represent you in the purchase, however, he/she might not work in your best interest as a dual agent. A Foreclosure can be negotiated but be prepared to loose out if it is a great deal. Investors are coming back into the market. I would also recommend having an inspection done to find any hidden defects.

This home sounds like it is in the Original Lake in the Hills off of Rt. 62. I lived in there and am familiar with the area. Give me a call and I would be happy to help you out in your purchase.

Melissa Leetzow E-PRO SFR Realtor
Coldwell Banker Primus
0 votes Thank Flag Link Wed Jan 13, 2010
Add my input to your question:

1: Rehab loans (fha 203k) are available with upto $35,000 in repairs can be financed, still with 3.5% down.
These do take longer and will have some inspection fees attached.
2. You do HAVE to submit a letter that you either have the cash available or a pre-approval on a mtg. (203k does not go thru automatic under writing). There is some changes coming to mtg. lenders about pre-approvals.
3. You should do a home inspection (comes after offer acceptance). If winterized you will pay a rewinterization fee to get water on. Also you need to schedule the inspection around your appraisial, lenders are requiring utilities on when they do their appraisials.
4. Know what the home will be worth when you are done with repairs(in todays market-not what it sold for before).
5. Get a agent to represent you, who understands the REO/Short sale process.
6. If the property is priced well it will go quick and yes somethimes over asking price. Just remember what will it be worth when your done rehabbing. Cost plus rehab, is the property still a good deal in TODAY's dollars.
I also tell my clients you get what you see and what you don't. Lenders are selling as-is, you need to understand that. I have been helping my clients for over 30 years(learned in the early eighties in the REO market then), to understand RE investing for the long term. I f can be of any help feel free to contact me.

Larry Hines CDPE
Re/Max Horizon
Web Reference:
0 votes Thank Flag Link Wed Jan 13, 2010
First off, visit with any qualified loan officer(s) first, see exactly what your budget can handle and check that credit score. Next, call a few realty offices, interview a couple of agents and choose the one you like best. You need to know if the property is listed on target with today's market or is it listed lower than current market --you need to know about recently closed similar properties in the immediate area, then factor in repairs, extensive or cosmetic. Keep in mind if the property is listed lower than it's worth, multiple bids may occur and it could end selling over asking price--remember, the bank wants to get as much money back as possible, and it is the bank who decides to accept, reject or counter offer. Foreclosures are by no means fast sales, so patience is needed. A good agent will guide you through the process.

0 votes Thank Flag Link Wed Jan 13, 2010

I've had a ton of experience with foreclosures in the last few years. Here's the best I can tell you:

1. Get an agent to represent you in the deal. Technically, the listing agent isn't supposed to be able to seel it to you, but there are agents who DO do're better represented by an outside agent.

2. You won't be able to submit an offer on a foreclosure until you are pre-approved (your buyer's agent should have lots of resources...I have several!) But no bank will pay attention to your offer until you are. Pre-qualification takes about 5 -10 minutes over the phone so don't let this step scare you!

3. Minimum down payment these days is 3.5% on an FHA loan...that's the lowest you can go. Now, as a first time home buyer, you'd qualify for the $8000 tax credit...have anyone who can loan you up to $8000 until you get it back from the government???

4. If it's a good value, it will go very fast...maybe with multiple offers. A LOT of foreclosures are going at or above list because of the value!

5. You should still have a right to an inspection with a foreclosure which should reveal any "surprises"...and you'd have a right to back out based on that. Also good to have a good attorney working for you and protecting you...agents should have resources for that as well (again, I have SEVERAL that are great!)

More than happy to answer any other questions you might have!!

Amy Foote
Baird & Warner
0 votes Thank Flag Link Wed Jan 13, 2010
Step one would be for you to speak with a lender and see what financing you can obtain for this home. As far as negotiating, prices for foreclosed homes can be negotiated but it varies from house to house. If it is an amazing deal and there are multiple offers, don't be surprised to see the home go for more than list price. I would highly recommend working with your own agent when you submit an offer. Actually, obtaining a buyers agent should be step one. Having a buyers agent on your side during the home buying process will help you greatly, especially if you are a first time home buyer. Feel free to contact me anytime with any questions you may have. If you'd like, you can send me the property address and I can see how much negotiating room there might be. I always like to tell people that foreclosed properties and short sales are like snowflakes. Every single one is different from the other. You might have 2 months before someone else decides to submit an offer or there could already be 15 offers on the table right now.

Best Regards,

James Crannell
Baird & Warner | Lincoln Park
Phone: 773-766-7490
Fax: 773-409-5591
0 votes Thank Flag Link Wed Jan 13, 2010
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