Buying a Foreclosed Home
In today’s real estate world, it is common knowledge that buying a foreclosed home can be a great way to save several thousand dollars on a home purchase.
I have been in the real estate industry for several years and have a vast amount of knowledge and experience. I enjoy writing and sharing some of this knowledge to help my colleagues as well as home buyers.
If you are looking to purchase a foreclosure, there are several things that you need to know and understand before embarking upon the most expensive purchase of your life.
First and foremost, a seller will not even consider your offer to purchase with financing unless it is accompanied by a reputable lender pre-approval letter for a mortgage. If you intend on paying cash for your purchase, be prepared to give your Realtor a document showing POF (proof of funds). The POF does not have to be your bank statement; a letter written on your bank’s stationary will suffice as long as it contains your name and states that you have the available funds to complete the purchase.
There are numerous types of mortgages that may be applicable when buying a foreclosed home. As typical when buying a consumer owned home, the condition of the home plays a huge role in the type of mortgage permissible.
A few types of mortgages could be; FHA; FHA 203k (renovation loan); Conventional loan; USDA No money down loan, etc. Your Realtor (and loan officer) should be able to help determine what type of loan would be your best choice for completing the purchase.
Don’t forget to take a blank check with you to the showings. If you decide to write an offer, a check for the earnest money deposit will be required to accompany your offer. The “norms” are usually $500 or perhaps $1000. The higher the amount of earnest money that you present will increase the chances of your offer being accepted by the seller. If you are writing a cash offer, it is in your best interest to supply a check (often required by the seller) for at least 10% of the purchase price.
Before you ask your Realtor to begin showing you homes, it is best that you supply this document to him/her on your first meeting together. This will give your agent piece of mind they are working with a qualified buyer.
When I show foreclosed homes, I do not “dress up”. I wear jeans or shorts and a nice shirt. In the past, I ruined a few pairs of dress slacks when showing foreclosures. Sometimes, a foreclosed home might still contain a lot of debris, etc, left over from the previous owner and can also be very dirty.
Most foreclosed homes do not contain electric or water either, so make sure that you take a flash light along and use the restroom prior to embarking on your home tour.
Leave your emotions at home before you begin your home shopping tour also. Often, graffiti is left behind by the previous owner’s that may tug at your heart strings and make you feel guilty about trying to buy “their” home. At times, the graffiti can be quite colorful and downright nasty too or even threatening.
Safety is also something that should not be taken lightly. When entering a foreclosed (vacant) home, I always knock loudly before entering as well as make a lot of noise. This could give a potential squatter or dope head time to make a quick exit out the back door should any vagrants be inside.
Something that can be very difficult for a Realtor to get their client to understand is the pricing. Previously, a foreclosure seller would price their homes too high and then end up having to continually lower the price until they snagged a buyer. Within the past year or so, sellers have become more in tune with fair and proper pricing.
Nowadays, it is very common for a foreclosed home to sell at asking price or in some cases several thousand dollars higher. One recent example of a foreclosed home that my client was trying to buy; asking price was $150,000. The home ended up selling for $182,000. (The home ended up having 7 offers on it due to it being aggressively priced to begin with)
If you are looking to buy a foreclosed home, it is in your best interest to work with a Realtor that has the experience and knowledge of what it takes to get your offer accepted.
With my years of experience and knowledge of the industry, I’m very qualified to be your Realtor.
How can I be of assistance?