It becomes crucial to get a good home inspection to determine what, if anything, needs to be addressed. After the inspection, you need to get accurate estimates for the work to be done. A good Realtor can help you determine what the value of the home will be after all repairs are done. Now you just have to do the math: Value after repairs - cost of repairs = current value. Best of luck!

Feel free to contact me for more information. I don't make money for referrals, just my inspections.

Rafi Footerman
Mid Jersey Inspections
732-906-4100
NJ Home Inspector Lic. #076900

Mikenel,
REO homes may sound cheap, but they may come at a cost. They are by and large sold in as is condition, and any unknown defects or conditions are made by the buyer at their own expense. So now the cheap home has cost and risk, and is not for the faint of heart. If you would like information without pressure on the tried and true method for a first time buyer to buy a home that is affordable, well priced and has condition, please reach out to my husband and I, we are teamed up, he handles first time buyers, is an experienced loan officer and I am experienced in REO properties. Paul and Kathy

Mikenel,
REO/foreclosed homes are put on the market after the bank takes ownership and evicts the current homeowner. Typically the bank will seek out Broker Price Opinions to get an idea how much the home is worth "AS IS" and "After repairs" from a few different agents. Then they calculate the listing price based on this information - so the homes are listed for an adjusted price between fair market value on a regular residential home and the foreclosed home's current condition. Therefore making them appear "cheaper" than a regular residential resale property.

To make an offer, typically a single page "Offer to Purchase" is made outlining the price you're offering for the home, whether your paying cash or financing, if you're seeking a seller concession to help pay some closing costs and whether or not the sale is contingent upon the results of a home inspection. If the bank agrees on your price and terms, they'll write up a full contract (typically attaching an addendum to the contract outlining detailed terms to the sale - i.e. a penalty for not closing on time etc) and send it to you and your buyer's agent to sign. You'll still have an attorney review period, however, typically the bank's attorney will not be as flexible with adjusting the contract as would a private homeowner's attorney.

Once you're out of attorney review, you have your home inspection (if you so choose) and the rest is more typical of a privately owned real estate transaction.

Most of the foreclosures I see range from only needing new flooring and paint - all the way to - entire rehab projects. If you're looking as an end-user (to purchase a home as your primary residence) I would recommend teaming up with an agent that's well verse in both residential resale and foreclosures. They'll be able to show you the inventory that's best for your needs!

Christine
ERA Statewide Realty
christine.markow@era.com

The best thing you can do now is have all your ducks in a row. That is have your preapproval ready. Know what your closing costs is. Subscribe to a hotlist where you will receive new listings daily. This way when a good deal comes along you are ready to act. Remember you are not the only person looking for a home so good deals come and go quickly. In addition if you are looking to purchase a foreclosure most of them because of condition will not pass a standard appraisal. Obtaining the township certificate of occupancy is usually your respondsibility as a buyer also. So while purchasing a bank owned home can have some potential often the percentages are few.

PS-there are many services out there that try to bait you to pay for a "foreclosure" home list. Most of them are bogus.

Like anything else, you get what you pay for. The REO home I have an offer in on now has no plumbing. Every pipe is cut. It also has a furnace that looks like a coffee pot that boiled over. My buyer made the mistake of opening the refrigerator in the kitchen, and let's just say that if I bought this house I'd pay a sanitation worker very well to remove that thing.

Mickenel: Really, really basic answer---You can't get a cheap home by stating you are a newbie. My advice is simple. You're a first time buyer. Find expert guidance, such as a practiced Realtor provides. Consult with that agent and take their advice. They specialize on finding the best home for their clients at the best price that can be obtained. This does not always (or usually) mean a foreclosure. Let's face it, foreclosures are a small percent of the over-all market, so your chances of getting one are less than if you go for bargains in the regular deals. The other thing is that everybody knows about foreclosures and it's just like any other auction-like activity, real bargains are often recognized and bid up and real dogs are sometimes treated as real bargains and bid up as well.

Lots of luck.

Bill Holt

Mikenel,

REO homes are bank owned homes. You would go about buying the same as you would any other...put an offer in writing and see if the bank accepts or counters your offer.

The latter part of your question is more detailed. Under market value -- yes but definitely not cheap in the long run. Most REO homes are run down, in total need of rehab and even if the list price is good you really need to outweigh the costs of rehabbing the home in order to live in it. Most sellers in foreclosure let the property go, some trashed on the way out...poured cement down the drains, left the faucets on so the houses flooded...you can't imagine the these we've seen in foreclosed properties. It can be very costly and that's fine if you would like to take on that type of property but in the end...all the money you've spent should be equal or less than equal to at least what the house is worth in the rehabbed condition. Most bank homes are sold as is so you take on the full responsibility for repairs.

Bottom line is there is plenty of inventory on the market and honestly sometimes the foreclosed homes are no better deals than ones that are in good condition and correctly priced. Don't limit yourself...look at everything and outweigh the pros and cons.

Good luck.

Gina Chirico, Sales Associate
Prudential NJ Properties
973-715-1158 cell
973-992-6363 ext 116
Gina.Chirico@PrudentialNewJersey.com