What is the process for buying a foreclosed home? Are they hard to purchase? What time frame should one allow for this process?

Asked by TR, Alameda, CA Thu Jun 20, 2013

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The Medford…, Agent, Fremont, CA
Fri Jun 21, 2013
I agree with Tomi - it depends. Here is a post that may be helpful:

How To Buy An REO – Top 17 Questions Answered
http://www.trulia.com/blog/carl_medford/2009/04/how_to_buy_a…
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0 votes
Fred Herman, Agent, Staten Island, NY
Thu Jun 20, 2013
find an agent that has some experience with REO's.

do you want to buy the home to live in?? to flip?? to fix up and rent???

most foreclosures/REO's need work, some a lot of work. so you need to factor in what that work will cost to calculate what is the max you should pay for the home. if you plan on flipping you need to factor in a profit.

just as a rough example if you're buying the home to live in: you estimate 300k in needed rehab and the home will have a market value of $550k, then you don't want to pay more than $250k.

But actually you need to be somewhat conservative. the $550k market value estimate may actually be $500k. The $250k estimate for the rehab may end up costing $300k. And of course, you're considering a foreclosure with the intension of saving some money, not to spend $550 to have a property that worth $550k, or why bother. So $175k to $200k might be a more realistic max to pay for the property in this over-simplified example.

are you a cash buyer??? in addition to the cash needed for the purchase, do you have additional cash for the rehab???

for many/most REO's if a mortgage is needed, you'll need a rehab mortgage.
0 votes
Tomi Thomas, Agent, Oakland, CA
Thu Jun 20, 2013
The answer, not to be cagey, but in truth, to everything real estate is...it depends. It depends on who the owner is and how they approach the market. It depends on whether it is handled by a listing agent and in the local MLS, or by on-line auction, or by auction on the court-house steps. I do not recommend the latter two to inexperienced buyers, because you do not get the benefit of title insurance or inspections, and that can set you up for expensive mistakes. Homes listed in the MLS are typically handled exactly the same way as other locally marketed properties, other than the fact that they are usually not spruced up or staged before the sale...and the seller does not provide any inspections, unless another buyer has written an offer, paid for inspections and then walked away. It can be a good way to get a better deal on a property, but you will usually earn any benefit you gain, because you take it in AS IS condition.

Good luck.
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