The Best Tips for Buying a Foreclosed Home

The housing market is stabilizing and prices are increasing, especially in the Seattle area. Though there may be less foreclosed properties out there, they are still available. Some experts say the foreclosure crisis is actually far from over.  The Best Tips for Buying a Foreclosed Home

Purchasing a foreclosed property is not the same as purchasing a regular re-sale of a home or a new construction home. Here are some things to help you if you are considering the purchase of a foreclosed home.  

The main differences between a foreclosure and a traditional home purchase are that: 

  1. Only one real-estate agent is involved 
  2. The seller requires a pre-approval letter from the buyer’s lender before accepting any offer 
  3. There is very little room for any negotiation  
  4. The home is purchased as-is and if anything is found in the inspection the buyer will pay for any repairs if they purchase the home 
  5. Many times the home is vacant allowing for a quick move in  

Tips for Purchasing a Foreclosed Home 

Find a Real Estate Broker and Get a Lender 

These are the first two things you should do and they should happen within a very short time of each other. Find a broker that is working directly with banks in possession of foreclosed properties. Do this at the same time you are interviewing lenders and getting a pre-approval letter. While you are doing this you can even use search engines that show foreclosed properties. Look for the letters REO this means Real Estate Owned (owned by bank).  

[Read More: The best tips on buying a fixer]

Get the Broker on Your Side 

 Instead of using your internet searching to find a home use it as a way to find a broker. Banks usually hire a handful of brokers to handle their properties in a market. In most foreclosure sales the buyer will work with the bank’s broker instead of a buyer’s agent. This saves money on commission costs. Many of these brokers have a long standing relationship with the bank and will know of homes not listed yet. Call about listings you found interesting and ask about any not yet listed that may be similar. With a foreclosure it can take some time before a listing is posted.  

Pre-approval Letter is Hugely Important 

 If you are planning to take out a loan for the home you will need a pre-approval letter from a lender. This letter shows the bank that owns the home proof of how much money you will be able to borrow based on the assessment the lender conducted of your financial health. 

Don’t wait to find the home first because a bank will not entertain your offer without this letter. It is not uncommon for foreclosure buyers to think that the bank that owns the home will finance the new purchase. The people in the REO department look at it as a completely separate transaction they are only interested in getting the homes off the bank books and as quickly as possible. 

[Read more: Getting great deals on the local MLS]

Prices Depend on Sales Pace 

There is no set formula on the lowest price the bank will take for a foreclosure. One similarity to traditional home sales is that you have to look at comps for similar properties in the area. A competitive offer, one that will be taken seriously, will be based on comps. Sometimes the home will be priced really low and you will be part of a bidding war and other times the home may be priced high and you can come in at a lower offer.  

Look at the absorption rate for your product class. This means find the rate that comparable houses are selling. If comparable homes are selling swiftly it is best to come in at a higher offer, unless the property has been sitting for a while. If you fear being upset over losing the property then put in your best offer.  

Don’t Expect the Price to Go Down for Repair Issues 

 In nearly every foreclosure sale the home is sold as-is. A home that is priced well and competitive to comps will sell for that price regardless of condition. Don’t go through inspection and expect to come back to the bank asking to lower the price because of needed work. This is one of the biggest differences from a traditional sale.  

An inspection is done so that you can decide if you want to take on the repairs. It is good to get to know people in the construction business at this point.  

For more great home buying and home selling information please browse our website or contact one of our many experienced Better Properties Agents in your area.  Or, feel free to comment below and one of our agents will respond shortly.

Related: Finding the Best of the Local Market

 

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