There are many issues to consider:
If their is PMI
and most of all TIME.
I do a lot of these, but what you need to think of is this:
What is your dream home?
Where do you want to live?
What is your time frame?
Did you sell your house and need to move quickly?
I would not limit your opportunities to foreclosures - check them all out. There are a LOT of motivated sellers who have to move and you may just get a better opportunity from that area.
I suggest you contact a buyers agent in the area you want to move TO, and let them send you everything on the market that meets your goals. Also, get underwriting committment from a mtg company so you have high leverage when negotiatiing.
I guess buying forclosure is not for everyone but - now have the house of my dreams!!
Tips I can give you are:
- Have patience, nobody seems to know how these things work!
- If you do make an offer, dont wait for an answer (it could take weeks!) keep on looking around and maybe you'll find something that you like even better!
- Don't let you emotions guide you. Know what you want to spend and dont go over that amount even if there is a bidding war going on. It is a buyers market. You'll find something else for sure.
- the closing costs always surprise, even more with these foreclosures so keep that in mind.
FORECLOSURE REALITY CHECK.... Seasoned investors who buy foreclosures know the REO manager at the bank and get "off market" deals. They never have to bid or find a place to learn what's available.
FOR ALL OTHERS: The only "sellers market" in america is the foreclosure market. Don't expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market. For government foreclosed homes, by law, they have to be priced "at market".
The REO manager has a short list of "cash/close in 2 day buyers", they always get the first right to bid. Then they have to wait for the "public auction" Which drives up those prices. After a 30-60 day period. Then the REO picks the best bid. Sometimes, only sometimes does a REO manager take a property directly to a buyer he knows peronsally. Why should he, he has a bunch of people bidding and driving up the prices.
My REO manager friend likes to joke about all the "first timers" who continue to drive up the bid when they don't hear anything from the bank. Every time I see the "how come I haven't heard from the bank about accepting my foreclosure bid after 30+ days" on trulia, I have to let out a chuckle because he's so right. For those newbies, this is real. They know that when you don't hear from them that a large percentage of people drop a second or third offer higher than the previous one. **WARNING, YOU ARE BEING TAKEN ADVANTAGE OF HERE**
You want a deal on a property right, everyone wants that.... So the moral of this story is:
1. the 60 days you have to wait to hear from a REO, you could have made 2 or 3 better deals with a property that has been on the market for a long period of time. Any realtor can help you drop a crazy offer.
2. You are attempting to make a deal in a house covered in a cloud of bad energy, don't be surprised when it rubs off. Personally I stay away from these for this reason entirely.
3. One way to get a deal is dropping a hand written note on ANY house in a neighborhood you want to buy that says "my girlfriend and I want to buy a house in this neighborhood and yours looks cute from the outside. Do you know anyone that is looking to sell?" I always get responses, better prices and positive energy into the home.
I personally highly recommend investing in real estate, as I have been quite successful in this arena, but it is not for everyone, and do be careful waving that cash around...:^)
Hope this helps, and if you need financing let me know. If its going to be your primary residence you might want to hold on to your cash for other investments FHA homeloans only require 3% from the buyer,
Other advantages include minimal Down Payment and Closing Costs.
Downpayment less than 3% of Sales Price.
100% Financing options available.
Gift for downpayment and closing costs allowed.
No reserves or required.
FHA regulated closing costs.
Seller can credit up to 6% of sales price towards buyers costs.
Easier Credit Qualifying Guidelines such as:
No minimum FICO score or credit score requirments.
FHA will allow a home purchase two years after a Bankruptcy.
FHA will allow a home purchase three years after a Foreclosure.
Easier Debt Ratio & Job Requirement Guidelines such as
Higher Debt Ratio's than other home loan programs.
Less than 2 years on the job is allowed.
Self-Employed individuals o.k.
If you have 100k in cash, why do you want to buy real estate?
There is a book called IRRATIONAL EXUBERANCE by Robert Shiller. It shows that real estate values barely keep up with the pace of inflation. He demonstrates hundreds of years of statistics that show real estate is one of the worst places to invest your money. You might want to check it out...
Also, check out this article in Business Week:
But, really, I'm curious. Have you done research? What leads you to want to purchase real estate? Maybe I'm missing something...
I would agree with most here that the best course of action is to find what you want first, regardless of whether it is a foreclosure or regular sale. Short sales are horrible in most circumstances. Most listing agents have no idea how they even work. Let me know if you would like me to help you. The best thing is to speak with a reputable lender to find out the best way to structure the loan. The goal is for you to be comfortable financially first, i.e. If you see a $330k house you will think ok, this house with my downpayment will cost me X dollars/mo. Doing it this way makes it more fun for you and a whole lot less stressful. Please let me know if you have any other questions