I'm a first home buyer. I want to buy a foreclosure home. They seem to be the cheapest. The most I would be able to pay a month are $1,400.

Asked by Ecargsand, Los Angeles, CA Sat Nov 7, 2009

How do you buy one of those foreclosure homes? What is the process?

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Deborah Brem…, Agent, Los Angeles, CA
Sun Nov 8, 2009
You have gotten many answers, below, on the steps to buying a foreclosure. I'd like to speak about one aspect of foreclosure purchase that hasn't been addressed: Should you even buy a foreclosure?
You can buy foreclosures for as much as 30% or 40% below market, but most foreclosures sell for less than 5% below market. That small savings may be offset by other factors in the transaction.
Price-conscious home buyers are lured by the low prices advertised for properties in foreclosure. They hope to show up at the auction and win the lowest bid. Before you rush forward to buy a foreclosure, stop to think about some of the drawbacks and repercussions of a foreclosure sale.
For most consumers, purchasing through the foreclosure process can prove daunting. Good buys are available, but they require research, preparation, patience and persistence. And retail sales are priced using the very same comparable sales, so their price is often comparable.
The foreclosure process starts when a property owner falls behind on mortgage payments. Many owners of homes that go into foreclosure have been struggling financially for almost a year before they give up, which usually means that the house has not received needed repairs or general maintenance for a while.
This may run the entire spectrum of issues, from missing light bulbs to roof leaks. Trash in front yards, dead landscaping, broken appliances and windows, and dirty carpets, floors and walls are found in properties even in very affluent areas. Homeowners who are angry about losing their house have been known to remove fixtures, cabinets, appliances, even the tub or toilets. Walls may be broken, and pipes for the plumbing removed.
Houses in poor condition might fetch bargain prices, but repairs can boost the cost again. Any savings in price is eaten up by cash that must be put into the property to make it habitable. If this is a first home for you, and you are living on a tight budget, your purchase may leave you no money afterwards for major repairs or upgrades. In that case, a "retail" purchase (one where the owner is the seller, as opposed to a bank) is a much better solution for you.
The first rule of real estate, ("location, location, location,") applies here. If there is trash in every room of the house, but the property is in a good area with highresale values, hold your nose, walk through the entire house and consider making a low offer.
Be sure you know who is living in the property. If the property is occupied, the successful bidder is typically responsible for removing the occupants, who may not be the previous owners. They could be relatives or friends of the owners, renters or squatters. These tenants have rights. Be sure you are aware of all local ordinances that may apply, because you might have to evict them. If you are unfamiliar with eviction processes, you should hire a lawyer to handle it for you.
Because these homes are purchased "as is" from the lender or HUD, there is no guarantee of condition, and properties are often sold "as-is", with no warranties. Sometimes it is possible to inspect these homes prior to making an offer, but sometimes access is not granted.
If the property is in poor enough condition, it will not be eligible for many loan programs that would otherwise be attractive to a first time home buyer, including FHA. Some foreclosures are advertised as "cash only" purchases for this very reason; no lender will make a loan on the property.
Buying foreclosures is not for the faint of heart. It's best handled by the pros and is not recommended for first-time homebuyers. This information is meant to prepare you for the reality of the foreclosure market.
If you still feel a foreclosure is for you, I would urge you to do the following:
1. Speak with a mortgage broker who is knowledgeable about lending on foreclosures. Get pre-qualified with several different loans you could use, depending on the overall property condition.
2. Hire a great Realtor as your exclusive buyer's agent. Have them run a property profile on each property you are interested in, as well as a complete market analysis. Be sure that the "bargain" you are buying is really a bargain.
3. Speak with a home inspector and a contractor, so you are sure you know the condition of the property and the true cost of repairs.
4. If you can't see the home, don't buy it. If it's not a bargain, pass it up.
5. And please, remember to look at those retail sales. In the long run, it may be a simpler, happier way to go for a first time homebuyer.
Would you like to speak more about this? Please feel free to call or email me. Regardless, congratulations on purchasing your fist home. And don't forget to take advantage of the $8000 homebuyer tax credit! Best of luck.
Deborah Bremner
(D) 310.571.1364
9 votes
Lori Duran, Agent, Mission Viejo, CA
Wed Dec 30, 2009
My advice is get approved for your loan and find an experienced realtor. Foreclosures can be a good opportunity for a first time buyer. It is important that you find a realtor who knows the correct way to write your offer, meaning writing it so that your offer stands out from the crowd. The process will require making offers on many properties before you get an acceptance. I suggest that you concentrate your efforts on Freddie Mac and Fanniemae properties. You can find them on homesteps.com and homepath.com, they prefer FHA and VA financing and want to sell to first time buyers. Another option is to get approved for an FHA 203k rehab loan. Not many agents are experienced with this financing so make sure the agent you pick has closed transactions under this program. This will increase your odds of an acceptance because all your standard FHA and Va buyers will not be making offers on properties that need work. I recently helped a young man purchase his first home using this program. We made an offer on a home that was missing the kitchen and toilets in bathrooms. This home would not pass FHA or VA standards so we only had a few other investor buyers to compete with. We were accepted because it was a Freddiemac foreclosure and my client was a first time homebuyer. The cost of the new kitchen, bathrooms, appliances, paint and carpeting were built into his new loan. He will be moving in to his almost new home next week.
Lori Duran
Broker Associate
ERA Yes!
Glendora Ca
1 vote
Terri Vellios, Agent, Campbell, CA
Sun Jan 31, 2010
Steps to Buying.

1) Don't get fixed on one thought, keep an open mind
2) Interview and select a Realtor who knows of several loan programs
1) FHA 2) HomePath 3) BMR 4) City/County Programs
3) Your Realtor will recommend one or more lenders to work with and possibly a financial planner.
4) Your Realtor will take you through the Buyer Process in a Buyer's Interview Meeting
5) You very well may be able to find something that is not a foreclosure, so as I started with, Keep an open mind.
6) Your Realtor will give you a plan and a list along with your lender to achieve your goal.

Good Luck. Oh, geez, I just typed this whole thing up and realized you posted this in November. Did you find your home?
Web Reference:  http://www.terrivellios.com
0 votes
Voncille Den…, Both Buyer And Seller, Jacksonville, FL
Tue Jan 26, 2010
Hi ... First Question What is your comfort level of payment?
Next does your income support your level with total assets..
203K is great...can be time consuming for financing if you want to take advantage of tax credit offer.
Keep all options open... Short Sale "PRE-APPROVED" by bank only IF NOT PRE-APPROVED CAN
Some offer allowed amount for repair(s) in the loan amount. This is an additional option.
Form a check list of things you must check that can be costly to repair.

There are some wonderful homes available and the best time to buy. White we are not located in your state we network with an agent(s) in your state so do not be discouraged just research... research...

Sign up for my FREE newsletter... we send out not only wholesale properties...but tips... etc.. for first time homebuyers...and other savings tips for home owners. go to http://www.propertydealzs.com

We offer services of Licensed Mortgage Broker, Short Sales, Property Inspections (local only) Property Managment, Financed Loan Mod's, Suggestions-Saving Tips etc... Wishing you the best...

Additional option...you could s
0 votes
David Tapper, Agent, Burlingame, CA
Sun Jan 10, 2010
Follow Deborah and Lori's advice. I couldn't say it any better. I give them both a thumbs up. Foreclosures "can be good buys for consumers" but don't put all your eggs in one basket.


Cashin Company
0 votes
James Adair, , Portland, OR
Tue Dec 15, 2009
I would definitely explore the Fannie Mae "homepath" program. My company offers it and can get you set up to buy a fannie mae foreclosed home with special loan terms. 3% down, no PMI, and no appraisal. I have a blog post with all the details including a link to a great website that allows you to identify all the homepath approved properties for sale: http://www.oregonmortgageblog.com/mortgage-programs/foreclos…

ps- even though its called "the oregon mortgage blog" we are approved to lend in all states on the west coast.

good luck!
0 votes
Kayd, , Baldwin Hills, Los Angeles, CA
Tue Nov 10, 2009
umm, well since your a first time home buyer keep looking more things will come available maybe in a different area. good luck!
0 votes
Jenny A. Le, , California
Sun Nov 8, 2009
Hello, there's no "special" process to buy a foreclosure (aka REO) home. The best thing a home buyer can do is to be "ready" to act when the right property comes along. This means the following ...

1. Get pre-approve for a loan (with direct lenders like BofA, Chase, CitiMortgage, Wellsfargo, etc). Request for a copy of the pre-approval letter so you can use it when submitting your offers.

2. Minimum down payment requirement nowadays is at least 3.5% or the higher the better.
(although you can work with local non-profit housing agencies to gain access to good alternative loan programs sponsor in partnership by the agency and FHA, VA, Fannie, and Freddie ... let me know if you have more ???)

3. Based on $1,400/month, your target purchase price should be between $200K - $250K. However, your purchase price is dependent on how much the lender is willing to lend you based on your income.

4. Narrow down on the locations of where you want to live/buy.

5. Work with a Realtor to send you active listings of REOs, shortsale, and regular sale properties. It cost the buyer ZERO to work with an agent.

6. Ask for a comparable market analysis (CMA) of the locations of where you want to live.

7. Based on the CMA, decide to target on single family homes or condo/townhouse ... based on your affordable purchase price

8. Preview homes

9. Be ready to submit offers with the following attachments: bank pre-approval letter, copy of check for initial deposit, credit report, current bank statement to show your proof of funds for your down payment.

10. Research on home inspectors, termite inspectors, homeowner insurance agents, holding vesting title, contractors (because "the cheapest" homes will need some repairs.) Although your agent can help you with this, it is better if you do your own research so you know. You will need these services after owning a home.

11. Wait for seller response to your offer .... have lots of patience because the seller is a "bank" not the homeowner.

12. When your offer is accepted, escrow will open. Generally, escrow will take approx. 30 - 45 days. However, banks (the sellers) prefers a short escrow time line.

During escrow, buyer's inspection period begins, seller's disclosures will be sent to you, inspectors will do their work and provide written results, your lender will arrange for an appraiser to prepare an appraisal. You provide the lender with proof of homeowner insurance. There are other steps and they arise when negotiation is needed.

Let me know if you have any question: Contact@ActusPropertySolutions.com
0 votes
Jesse Sierra, Agent, Pomona, CA
Sun Nov 8, 2009
Hi Ecargsand,
Your first step is to talk to a direct lender.
I have had good results from Bank of America and Wells Fargo.
You can check with both banks and see which one gives you a better rate.

Take the following to get a better idea:
2 recent complete tax returns (2007-2008)
2 most recent bank statements
4 pay check stubs
Also an itemized list of credit card payments or other payments you might have.

Wishing you the best,

Jes Sierra, B.Sc.
Century21 Beachside Realtors®
Chino Hills, California
0 votes
Dorene Slavi…, Agent, Torrance, CA
Sat Nov 7, 2009
Dear Ecargsand,
The first step would be to interview a Realtor, and meet with them to be pre-qualified for a loan. I would recommend that you take a look at the agents listed here, on Trulia.
Web Reference:  http://www.doreneslavitz.com
0 votes
John Villaes…, , California
Sat Nov 7, 2009
First thing is to get pre-approved by a bank( Home Path would be ideal) because most REO agents out there are requiring much up-front documentation such as FICO scores, Pre-Approval Letter, Bank Statements, Earnest Money Deposit(the higher the better) and also I'm noticing they want you Home Path Financing to be your loan program. I work heavily in the Los Angeles area so if your are interested, I can get you jump started on getting everything you need to buy your home.

Please contact me at any of the following for further information.

John & Sarena Villaescusa
Cell- 562-818-2671
Email- Joihnv@kw.com
Website- http://www.VGroupHomes.com
Web Reference:  http://www.VGroupHomes.com
0 votes
Dot Chance, Agent, Burbank, CA
Sat Nov 7, 2009
Ecargsand, there are many great deals on homes right now. The agent below gave you great advice - do not limit yourself to foreclosures. Definitely get pre-approved by a mortgage professional to see how much you can spend.

All my best,
Web Reference:  http://www.DotChance.com
0 votes
Ray Calnan, , Los Angeles, CA
Sat Nov 7, 2009
The process is the same as buying any other home. You need to interview a few Realtors and find one that knows your area and that you are compatible with.

Do not limit yourself to only looking for a "foreclosure" property. Determine what you can afford, by talking to a mortgage professional, based upon how much you are willing to pay. Then look at all homes that are within your price range that meet your criteria.

Good luck,

Web Reference:  http://www.charityar.com
0 votes
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