SO YOU WANT TO BUY A FORCLOSED HOME? Tips and Secrets revealed

With all the bank owned properties out there, is this the right market for you?  The first thing you need is to be pre-approved for a loan. No bank will look at your offer without it. There is a difference between prequalified and preapproved. A pre qualification looks at your credit score, your income and liabilities you state and gives you a sales price you should be searching in. however a pre-approval will confirm you are able to get the loan by verifying your income, assetts and liabilities. The second thing you need to know is the house you are buying is sold "as is". It means the bank is not making any warranty, guarantee or disclosure on anything in the home.You should know that the home is sold as is, so dont ask the bank to fix anything or it could cause your offer to be rejected. The third thing you should know is some banks will let you have an inspection however they will not renegotiate the price after the inspection. You shoud  inspect the property before you put in the offer. If you dont want to spend the money for some reason, then when looking at the home you are going to need to look at the well, septic, roof, siding, windows, heating system, look under the sinks, in the basement for signs of water or mold, stains on the ceilings and anything that sticks out or if you are getting an fha loan, any safety issues. Fourth is your deposit, it should be in certified funds and should be at least 1% of the sales price. The higher your deposit, the better your offer will look. Fifth is to be prepared for the bank to take time to answer your offer, to get you the signed purchase and sales and make sure the foreclsoure deed is complete and recorded, otherwise this could hold up your closing. Lastly is time. you should be prepared to close within 30 days of the accepted offer.
  • August 08 2010 - Manchester
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Answers (5)

Excellent tips and advice here, great job.
  • August 08 2010
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Great post, I would add that my lender accounts will usually repair any issue that is safety related or problem that will affect the marketablity of the home for them right now. Recently I have had lenders strap water heaters, change out ducting, secure light fixtures and repair a roof. the time to ask is once you have been accepted and after you have a reputable inspection done. Include the inspection items that seem urgent and submit a request for repair during your inspection period. Lenders do not all respond the same but it is OK to ask at this point.
  • August 11 2010
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Also understand what you Minimum Property Requirements (MPR) are for your loan if FHA or VA Loan...

FHA (http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm)
VA (http://www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch12.doc)

Knowing these will help keep you from getting locked mentally into a home that won't meet underwriting guidelines.

I sell REOs for Freddie Mac as well as represent investors purchasing Bank Owned Properties. Most bank will only make minimal repairs if Lender Required ie a fixture replacement, broken window replacement, or items of cost usually under a $1000. Again, Lender Required Repairs, not Home Inspection Notice of Request Repairs.

1% is not always required. I've seen dozens of REO Listings in the $200k-300k sell with only a $1500 earnest money. The bank will usually counter with a request of more if that's a concern, and once their negotiating with you 90% of the time your the primary offer of interest.
  • August 12 2010
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sctprop stated "You shoud  inspect the property before you put in the offer."

Please be aware that in some states this may not be possible as this may not be allowed until a contract has been agreed. Then inspections can take place. It will just depend on where you are located and any local practices that may be observed.
  • August 12 2010
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having dealt with foreclosures on many occasions, i believe your tips to be helpful, however, in this market, i don't think you would be doing any justice to your buyer by trying to fit in this box.  i had closed on a foreclosure with a buyer who had FHA financing, who also was permitted to repair the property (which i have been told on numerous occasions "never" happens).  i'm also currently negotiating another similar deal.

i've also noticed that most foreclosures in the area demand 10% down for cash deals, but will accept less for a mortgage deal.

and although a bank likes to sell "as-is", if your buyer is looking for a first-time purchase,... then you really should be trying to get an inspection contingency anyway.  NOTHING is ever written in stone.

your tips are fairly accurate, and to all you buyers out there:  "buying a foreclosure is not for the faint-of-heart.  you have to be pretty well-versed in home repairs and functions"
  • August 12 2010
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