What do I need to do to buy a foreclosure homes? (i'm a first time buyer)

Asked by Hilda, 95076 Tue Sep 2, 2008

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Amy Kearney, , 60201
Wed Sep 3, 2008

A foreclosure property is a home that has been repossessed by the lender because the owners failed to pay the mortgage. Thousands of homes end up in foreclosure every year. Economic conditions affect the number of foreclosures, too. Many people lose their homes due to job loss, credit problems or unexpected expenses.

It is wise to be cautious when considering a foreclosure. Many experts, in fact, advise inexperienced buyers to hire an expert to take them through the process. It is important to have the house thoroughly inspected and to be sure that any liens, undisclosed mortgages or court judgements are cleared or at least disclosed.
One reason there are few bidders at foreclosure sales is that it is next to impossible to get financing for such a property. You generally need to show up with cash and lots of it, or a line of credit with your bank upon which you can draw cashier's checks.

The U.S. Department of Housing and Urban Development acquires properties from lenders who foreclose on mortgages insured by HUD. These properties are available for sale to both homeowner-occupants and investors.

You can only buy HUD-owned properties through a licensed real estate broker, whose commission will be paid by HUD.

Down payments vary depending on whether the property is eligible for FHA insurance. If not, payments range 5 to 20 percent. When the property is FHA-insured, the down payment can go much lower. Each accepted offer must be accompanied by an "earnest money" deposit equal to 5 percent of the bid price not to exceed $2,000, but not less than $500.

You should be aware that HUD homes are sold "as is," meaning limited repairs have been made but no structural or mechanical warranties are implied
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Scott Godzyk, Agent, Manchester, NH
Wed Sep 3, 2008
Good afternoon Hilda,

first thing you need is patience....

Then make sure you get a pre-approval, it will b required to make an offer. Make sure you have the house inspected before you put in an offer as you are buying it as is. Your offer should reflect any repairs noticed. With your offer you need to be prepared to close within 30 days and your deposit should be at least 1% of the sales price if not more. Most banks ask for bank checks as deposits. the patience comes in as if your offer is accepted it usually takes the bank some time to get the signed contracts back to you. Make sure the foreclosure deed has been recorded or is at least prepared. This could hold up your closing for 4-6 weeks. lastly make sure you havea buyers agent who is familiar with bank owned properties and can guide you through all stages of the process. Good Luck Hilda.
Web Reference:  http://www.ScottSellsNH.com
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SantaCruzLen…, Agent, Aptos, CA
Wed Sep 3, 2008
Hi Hilda! This is Kathy Ishikawa, Ishikawa & Associates Real Estate Finance....congratulations on taking the first step to home ownership. It certainly is a good time to buy. i would imagine you are attracted to foreclosure homes due to their affordability, but don't forget that there are many 'short sale' values out there too. Your Realtor can help you out on that end.

As a financing expert, the starting point is always your financing. You must first determine how much of a home you can afford and qualify for....especially if you are considering making offers on a bank owned or short sale home; as those offers must be accompanied with a lender's pre-approval, or else they won't even be considered. Pre-qualifying for your financing presents you as a more serious buyer and is almost like having cash in hand. Some banks require pre-approvals from specific lenders, however ultimately who you choose to do your loan with is your choice. You cannot be compelled to get your financing from a specific lender in order to purchase a home,as that would be a violation of RESPA regulations.

As a First Time Homebuyer (FTHB), please be aware that there are a lot of programs that offer down payment assistance and lower rates to help the FTHB into their first home, and often times with little or no money down. I specialize in those types of loans as well as offer the full range of conventional and FHA financing.

Good luck with your search. Hope you found this helpful.
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Erica Pittma…, Agent, Santa Cruz, CA
Wed Sep 3, 2008
Hi Hilda-
Terry, Curt & Seb all gave great information. As Curt said, there are so many short sales & foreclosures right now that you will most likely end up purchasing one without focusing strictly on "foreclosures".
The most important thing is to find a Realtor that you "click" with and can trust. The best way to find that out is to arrange about a one hour meeting to get together and talk. You should talk to more than one Realtor and chose the one that feels like the best match for you. Eye to eye is key. If you're interested in meeting to discuss further, it would be my pleasure.
Erica Pittman-Gaynor (831)818-4123 Erica@EricaPittman.com
Keller Williams Santa Cruz
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Terry Ballan…, , 95003
Tue Sep 2, 2008
Hi Hilda!
Congratulations on expanding your horizons in real estate! Terry Ballantyne here, Broker for Indigo Beach Properties.
First, what is attracting you to foreclosures? Price point? Location? Wealth building? There are many excellent opportunities in real estate right now! But regarding the foreclosure, the best and fastest way
to obtain a property is to first secure a loan approval letter or a loan committment letter. Most banks are
clearly most interested in getting the highest price from a solid buyer who has demonstrated that he can perform. The process is very sterile and often frustrating, but the equity gains can be enormous. A good
Realtor can walk you through the process and answer all questions as they come up. But the process is
similar to any home purchase from your perspective. The lending and down payment are critical as you will be competing with cash investor buyers. Hope that helps, now go Seas Your Dream... http://.www.terryballantyne.com
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Curt Abramson, Agent, Santa Cruz, CA
Tue Sep 2, 2008
HIlda, Curt Abramson from Bailey Properties here. As I look at your question, I really tend to focus in on what might be the more important part of it - that you are a first time buyer. As tempting as a home in foreclosure may be, there are also some issues that need to be looked at. Bank-owned homes are limited in what they are required to disclose to you. For an experienced buyer, that may be less scary than for a first time buyer.

The most important thing you can do is to choose a Realtor who is ready and willing to help a first time buyer find the home that meets their needs best, and to make sure you get all the info you need to make a good decision.

I'm assuming you are interested in a home in the 95076 zip code. In our market, there are lots of options and most of them are either short sales or bank-owned, so it is likely you will be buying one of those. Helping you understand the differences with those types of sales, and taking the time to make sure you understand what you're getting into, will be the most important asset your Realtor can offer you.

My suggestion would be to look for the best deal, and don't assume that a "foreclosure" home is the only deal out there. There isn't any secret source for those - as Seb has said below, all banks use local brokers to list and sell their REO properties. Concentrate on choosing a Realtor who will help you find the right home.
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Sebastian Fr…, Agent, Capitola, CA
Tue Sep 2, 2008
Hi - the answer to that depends at which stage in the foreclosure process you plan to buy. I believe the best stage to buy for most people (especially first time buyers) is at the post-foreclosure stage, when the property has already gone back to the bank, and the home (condo, etc.) is now an "REO" (real estate owned). You find these homes for sale on the MLS, like any other "normal" sale. In fact, the sale process is very similar to buying from an an individual, with the notable caveat that the bank does not make any disclosures to you about the property, because they have no first-hand knowledge of it.

To proceed, you'll need to have a pre-approval from a mortgage broker - I recommend a direct lender (e.g. Wells Fargo, BofA, etc.). Often times, a bank that is selling an REO will require you to also get pre-approved with their lending arm, but that is usually pretty trivial once you have already been qualified by a direct lender.

I have a video on my web site of a presentation I gave back in April of 2008 about Opportunities in the Foreclosure Market in Santa Cruz, I think you may find it worth your while to watch - the link to it is referenced below.
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